Explain the Difference Between the Long Run and Short-Run Views

question 62

Essay

Explain the difference between the long run and short-run views of saving.

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Definitions:

FIFO

An accounting method for valuing inventory that assumes the first items produced or bought are the first ones sold, standing for First In, First Out.

Weighted-Average Cost Method

An inventory costing method that assigns the average cost of goods available for sale to both ending inventory and cost of goods sold, weighted by the quantity of goods.

LIFO

Last In, First Out is a method of valuing inventory where the items that were most recently produced or purchased are the first ones to be used in the calculation of cost of goods sold.

Periodic Inventory System

An inventory accounting system where updates are made on a periodic basis, such as monthly or yearly, rather than continuously.