When the Economy's Actual Price Level Exceeds the Expected Price

question 10

Multiple Choice

When the economy's actual price level exceeds the expected price level in the short run, _____

• A) the nominal wages of workers decline.
• B) the nominal wages of workers increase.
• C) firms decrease output below the potential level.
• D) the economy produces the natural rate of output.
• E) cyclical unemployment in the economy falls to zero.

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Definitions:

Variable Manufacturing Overhead

Costs that vary with the level of production output but are indirect in nature, such as indirect materials and utilities.

Fixed Manufacturing Overhead

Regular, fixed costs associated with operating a manufacturing facility, including costs like rent, depreciation, and property taxes.

Machine-Hours

A measure of production activity that represents the total hours machines are operating over a given period.

Overapplied

A scenario in which the overhead attributed to products or services surpasses the real overhead expenses.