If an Unintended Increase in Business Inventories Occurs at Some

question 103

Multiple Choice

If an unintended increase in business inventories occurs at some level of GDP, then GDP

• A) entails a rate of aggregate expenditures in excess of the rate of aggregate production.
• B) may be either above or below the equilibrium output.
• C) is too low for equilibrium.
• D) is too high for equilibrium.

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Definitions:

Static Budget

A financial plan that does not change or adjust with variations in business activity levels.

Labor Rate Variance

The difference between the actual cost of direct labor and its expected (or standard) cost during a given period.

Standard Rate

A predetermined cost per unit of measure or rate that is used in budgeting and costing calculations.

Actual Rate

The real, observed rate at which something occurs, often used in financial contexts to specify interest rates or exchange rates.