Use the Following to Answer Questions

question 283

Multiple Choice

Use the following to answer questions:
Figure: The Money Supply and Aggregate Demand
-(Figure: The Money Supply and Aggregate Demand) Refer to Figure: The Money Supply and Aggregate Demand. Panel (a) illustrates what happens when the Federal Reserve decides to _____ the money supply and _____ interest rates.

• A) decrease; lower
• B) increase; raise
• C) increase; lower
• D) decrease; raise

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Definitions:

Variable Expenses

Costs that change in proportion to the level of activity or volume of output produced.

Unit Fixed Expenses

These are expenses that do not change with the level of production or sales within a certain range and are calculated per unit of product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a finished unit of product.

Variable Costing

A costing method that includes only variable costs—those that change with production volume—in product pricing and decision-making.