If the Price Level in an Economy Turns Out to Be

question 193

Multiple Choice

If the price level in an economy turns out to be higher than that expected by workers and firms, _____.

• A) firms increase production.
• B) the economy's potential output level increases.
• C) the economy's short-run aggregate supply curve shifts rightward.
• D) the economy's short-run aggregate supply curve shifts leftward.
• E) a recessionary gap develops.

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Definitions:

Variable Production

Refers to the portion of production costs that vary with the level of output, including expenses like raw materials and direct labor.

Fixed Production

A quantity of manufacturing or output that remains constant, regardless of changes in production costs or sales volume.

Machine-Hours

A measure of production activity or volume, representing the total hours that machinery is operate during a specific period.

Product Costs

The direct costs associated with the creation of a product, including materials, labor, and manufacturing overhead.