In the Basic Model That Includes the AD and LRAS

question 99

Multiple Choice

In the basic model that includes the AD and LRAS curves only, shocks to aggregate demand always cause changes in:

• A) real GDP growth only.
• B) inflation only.
• C) both real GDP growth and inflation.
• D) neither real GDP growth nor inflation.

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Definitions:

Direct Labor Rate

The wage rate paid to employees directly involved in manufacturing goods or providing services, expressed per hour or per unit of output.

Time and Materials Pricing

A contract or pricing method where the customer pays the supplier based on the time spent to complete the work and the cost of materials used.

Production Capacity

The maximum amount of goods that can be produced in a given timeframe using available resources.

Contribution Margin

The amount by which sales revenue exceeds variable costs, used to cover fixed costs and generate profit.