If Workers Expect Inflation, and Negotiate Wage Increases That Exactly

question 210

Multiple Choice

If workers expect inflation, and negotiate wage increases that exactly match price increases, the result is a

• A)horizontal aggregate supply curve at the level of potential GDP.
• B)vertical aggregate supply curve at the level of potential GDP.
• C)horizontal aggregate demand curve at the level of potential GDP.
• D)vertical aggregate demand curve at the level of potential GDP.

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Definitions:

Conversion Costs

Conversion costs are the costs incurred to convert raw materials into finished goods, and typically include direct labor and manufacturing overhead expenses.

Weighted-Average Method

A costing method for inventory that determines the cost of goods sold and the remaining inventory value by averaging the costs of all available units for sale throughout the period.

Equivalent Units

A concept in cost accounting that is used to allocate costs to the production process when there is more than one stage of production, converting work-in-process into complete units of output.

Direct Labor Costs

These are wages and benefits paid for the labor directly involved in the manufacturing of products.