Suppose That a Severe Shock That Decreases the Demand for Loanable

question 28

Multiple Choice

Suppose that a severe shock that decreases the demand for loanable funds hits Australia. Which of the following can we expect to occur according to the real business cycle model?

• A)People will work fewer hours.
• B)The real wage rate will fall.
• C)The real interest rate will fall.
• D)All of the above are true.

---

Definitions:

Period Cost

Expenses that are not directly tied to the production process and are charged to the period in which they are incurred.

Future Decisions

Decisions that will be made in the future, often based on forecasts or projections.

Variable Cost Method

A pricing strategy that only accounts for direct materials, direct labor, and variable manufacturing overhead costs, excluding any fixed costs from its calculations.

Total Cost Method

An accounting approach that includes all manufacturing or production costs (direct materials, direct labor, and manufacturing overhead) in the cost of finished goods.