If the Target Inflation Rate Is 3 Percent and the Actual

question 10

Multiple Choice

If the target inflation rate is 3 percent and the actual rate of inflation falls below the target rate,

• A)the AD curve will shift to the left.
• B)the AD curve will shift to the right.
• C)there will be an upward movement along the AD curve.
• D)there will be a downward movement along the AD curve.
• E)the AD will not shift, nor will there be a movement along the AD curve.

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Definitions:

Weighted-Average Method

A costing method that averages all costs and applies them to output, typically used in process costing.

Conversion Cost

The aggregate cost of direct labor and manufacturing overhead associated with converting raw materials into finished goods.

Direct Materials

Raw materials that are directly incorporated into a finished product.

Work in Process

Inventory representing partially completed goods, which includes the cost of raw materials, labor, and overhead.