An Inflationary Output Gap Implies That

question 47

Multiple Choice

An inflationary output gap implies that

• A)the demand for all factor services will be relatively low.
• B)there is excess supply of most factors of production .
• C)there is a pressure for wages to decrease.
• D)the economy's resources are being used beyond their normal capacity.
• E)the intersection of AD and AS occurs at real GDP below potential output.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing a product, such as utilities, maintenance, and factory management salaries.

T-Accounts

Diagrammatic representations used in accounting to visualize debits and credits for individual accounts.

Direct Labor-Hours

A measure of the total hours of work directly involved in manufacturing goods or providing services.

Predetermined Overhead Rate

This is a calculated figure used to allocate manufacturing overhead costs to products based on a relevant activity such as machine hours or labor hours, set before the accounting period starts.