For the Past Several Months, Per Capita Output Has Increased

question 105

Multiple Choice

For the past several months, per capita output has increased at a slower and slower rate. Over the same period, the unemployment rate has been falling, but it appears that both have leveled off. Where in the business cycle is the economy?

• A) peak
• B) recession
• C) trough
• D) expansion

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Definitions:

Fixed Costs

Expenses that do not change with changes in the volume of production or sales, such as rent, salaries, and insurance.

Variable Costs

Costs that vary directly with the level of production or sales activity.

Contribution Margin Ratio

A financial metric that shows the portion of sales revenue that is not consumed by variable costs and is available to cover fixed costs.

Net Income

The earnings of a company after taking into account all expenses, including operational costs, interest, and taxes, subtracted from its total revenue.