Suppose the National Activity Index of the Federal Reserve Bank

question 70

Multiple Choice

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. What is the BEST interpretation of this finding?

• A) The economy grew at a rate of 0.25% for a few months, but economic growth actually decreased by 1.5% in November.
• B) The rate of economic growth slowed in November, but the economy did not move into a recession.
• C) The economy was in an expansion in October but moved into a recession in November.
• D) Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

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Definitions:

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used in production and the standard quantity expected, multiplied by the standard cost per unit.

Direct Materials Price Variance

It measures the difference between the actual cost and the standard cost of direct materials used in production, indicating how effectively a company is purchasing its raw materials.

Actual Costs

The actual expenses incurred in the production or acquisition of goods and services, as opposed to estimated or standard costs.

Standard Cost

An estimated or predetermined cost of performing an operation or producing a good, used in budgeting and variance analysis.