The Primary Factor That Caused Most Economists to Lose Their

question 22

Multiple Choice

The primary factor that caused most economists to lose their faith in the classical approach to macroeconomic policy was

• A)the high levels of unemployment that occurred during the Great Depression.
• B)the presence of both high unemployment and high inflation during the 1970s.
• C)the theoretical proof that classical ideas were invalid.
• D)the evidence that classical ideas were useful during economic booms, but not during economic recessions.

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Definitions:

Variable Costing

An accounting method that only includes direct variable costs in product costing and decision-making processes.

Absorption Costing

A method of accounting that incorporates all costs associated with manufacturing, including direct materials, direct labor, and overhead expenses, into the product's cost.

Contribution Format

A presentation format for the income statement where costs are separated into variable and fixed categories, highlighting the contribution margin.

Absorption Costing

An accounting method where all manufacturing costs, both fixed and variable, are attributed to the production of products.