When the Actual Rate of Inflation Is Less Than the Expected

question 12

Multiple Choice

When the actual rate of inflation is less than the expected rate,

• A) the unemployment rate will temporarily rise.
• B) firms will increase their output to recoup their falling profits.
• C) the unemployment rate will temporarily fall.
• D) firms will experience rising profits and thus increase their employment.

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Definitions:

Short-Run Decision Making

The process of making business decisions that are immediate or temporary, focusing on situations that do not alter the fixed costs.

Operating Leverage Factor

A ratio that measures the proportion of fixed costs to total costs, indicating how a change in sales volume impacts profitability.

Sales Volume

The quantity of products or services sold by a business during a specific period, often used as an indicator of business performance.

Cost Structure

The composition of a company's costs, including the proportion of fixed versus variable costs incurred in its operations.