If the Aggregate Supply Curve Is Flat

question 195

Multiple Choice

If the aggregate supply curve is flat,

• A)contractionary fiscal or monetary policy will reduce inflation with little effect on real GDP.
• B)contractionary fiscal or monetary policy will cause significantly less inflation.
• C)expansionary fiscal or monetary policy will add significantly to real GDP will little effect on inflation.
• D)expansionary fiscal or monetary policy will add little to real GDP but will increase inflation significantly.

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Definitions:

Direct Labor Cost

The sum of all expenses associated with labor that is directly used in the creation of products or services.

Labor Efficiency Variance

A measure of the difference between the actual hours worked and the standard hours expected, to produce a certain level of output.

Labor Rate Variance

The difference between the actual labor costs and the budgeted or standard labor costs, often due to differences in wage rates or work hours.

Standard Cost System

An accounting system that assigns predetermined costs to products and services, which are then compared to actual costs for variance analysis.