When an Increase in Aggregate Demand Exceeds the Increase in Aggregate

question 170

Multiple Choice

When an increase in aggregate demand exceeds the increase in aggregate supply

• A) real GDP decreases while nominal GDP increases.
• B) the price level falls while real GDP increases.
• C) nominal GDP decreases and real GDP decreases.
• D) the economy will experience inflation as the price level rises.

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Definitions:

Direct Costs

Expenses that can be directly traced to the production of a specific good or service, such as raw materials and direct labor.

Cost Object

Anything for which a separate measurement of costs is desired, such as products, services, or projects.

Economically Traced

The assignment of costs to a specific product or service based on the direct relationship between the cost and the object.

Activity-Based Costing

A technique which aims to assign costs to products or services based on the activities they require, providing detailed insights into spending and resource usage.