The Long-Run Trend in Real GDP Is Upward

question 114

Essay

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

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Definitions:

Direct Materials Costs

The expenses incurred for raw materials that are directly involved in the manufacturing of products.

FIFO Method

A stock rotation system where the oldest stock (first in) is used or sold first (first out).

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, computed by assessing the work done as a fraction of the completed goods.

First-In, First-Out Method

An inventory valuation method that assumes the first items placed in inventory are the first sold; useful in managing and valuing inventory.