Use the Following to Answer Questions

question 4

Multiple Choice

Use the following to answer questions:
Figure: Output Gap
-(Figure: Output Gap) Refer to Figure: Output Gap. If the economy is at Y₁ as a result of expansionary monetary policy and no further policy is implemented, in the long run nominal wages will _____ and shift the short-run aggregate supply curve to the _____, which will _____ real output.

• A) increase; left; decrease
• B) increase; right; increase
• C) decrease; left; decrease
• D) decrease; right; increase

---

Definitions:

Equivalent Unit

A concept used in cost accounting to convert partially completed goods into a number of complete units of output, allowing for a consistent measure of output.

Process Costing

A costing method used for continuous or batch processing environments where the product is homogeneous, assigning costs to units of output on an average basis.

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.

Equivalent Units

A method used in cost accounting to express partially completed goods in terms of finished goods to accurately calculate inventory costs.