Which of the Following Occurs When an Expansionary Gap Is

question 22

Multiple Choice

Which of the following occurs when an expansionary gap is closed in the long run by the action of firms?

• A)Output decreases,and the price level increases.
• B)Inflation decreases,and unemployment rises.
• C)Both the equilibrium output and the price level increase.
• D)Both the equilibrium output and the price level decrease.
• E)Inflation rises,and unemployment decreases

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Definitions:

Variable Costing

An accounting method that includes only variable costs - costs that change with production levels - in product cost calculations.

Net Operating Income

It refers to the profit generated from a company's ordinary, core business operations after subtracting operating expenses from operating revenues.

First Year

The initial year of operation, production, or accounting period.

Absorption Costing

An accounting method that integrates all costs associated with manufacturing, from direct materials and labor to variable and fixed overheads, into the final cost of a product.