In Low-Contact Systems, Capacity Should Be Set at the Level

question 258

True/False

In low-contact systems, capacity should be set at the level of average demand, but in high-contact systems, capacity should be set at the level of peak demand.

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Definitions:

Multiplier

An economic factor that quantifies the additional effect on income or output resulting from an injection of spending.

Deflationary Gap

A situation in economics where actual production is lower than the potential output level, often resulting in unemployment and unused productive capacity.

Equilibrium GDP

The level of Gross Domestic Product where aggregate supply equals aggregate demand in an economy.

Full Employment GDP

The output level produced by the economy when all available resources are efficiently employed, representing potential GDP under full employment.