Other Things Being Equal,as the Price Level Falls Exogenously,the Aggregate

question 34

Multiple Choice

Other things being equal,as the price level falls exogenously,the aggregate expenditure (AE) function shifts

• A)down and the economy will move upward along the AD curve.
• B)down and the economy will move downward along the AD curve.
• C)upward and the economy moves upward along the AD curve.
• D)upward and the economy moves downward along the AD curve.
• E)to the left,as does the AD curve.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with manufacturing that remain constant regardless of the level of production, such as salaries of management and rent of the facility.

Absorption Costing

A costing method that includes all manufacturing costs, both fixed and variable, in the cost of goods sold.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to individual products based on a certain activity base.

Normal Cost System

A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.