During an Inflationary Gap

question 82

Multiple Choice

During an inflationary gap,

• A)the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP.
• B)real GDP is less than potential GDP.
• C)the aggregate demand curve and the aggregate supply curve intersect at potential GDP.
• D)the aggregate demand curve and the aggregate supply curve do not intersect.
• E)the price level will fall to restore the long-run equilibrium.

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Definitions:

Manufacturing Overhead Applied

The allocation of estimated manufacturing overhead costs to individual products or job orders based on a predetermined overhead rate.

Sales Salaries Expense

The total cost incurred for salaries, wages, and commissions paid to sales personnel, reflecting a company's investment in its sales force.

Work in Process

Inventory consisting of items that are in the process of being produced but are not yet finished goods.

Direct Materials Cost

The cost of raw materials directly used in the production of goods, easily traceable to the final product.