When the Quantity of Real GDP Demanded Exceeds the Quantity

question 31

Multiple Choice

When the quantity of real GDP demanded exceeds the quantity of real GDP supplied, firms

• A) increase production and prices.
• B) decrease production and prices.
• C) increase production and lower prices.
• D) do not change production because aggregate demand and potential GDP will adjust.
• E) decrease production and increase prices.

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Definitions:

Quality Cost Report

A document detailing the costs associated with ensuring the quality of products or services, including prevention, appraisal, and failure costs.

Prevention Costs

Expenses incurred to avoid defects in products or services, including costs related to quality control and training.

Appraisal Costs

Costs associated with inspecting and testing both raw materials and finished products to ensure quality standards are met.

Internal Failure Costs

Costs associated with defects found before the delivery of a product to the customer, such as scrap and rework expenses.