Use the Figure Below to Answer the Following Questions

question 125

Multiple Choice

Use the figure below to answer the following questions.

Figure 27.2.2
The economy depicted does not engage in international trade and has no government. Planned aggregate expenditure (AE) is equal to the sum of consumption expenditure (C) and investment (I) .
-Refer to Figure 27.2.2. When real GDP is $100 billion,

• A)real GDP is less than aggregate planned expenditure, and firms increase production.
• B)aggregate planned expenditure is greater than real GDP, and firms decrease production.
• C)real GDP is greater than aggregate planned expenditure, and firms decrease production.
• D)aggregate planned expenditure equals real GDP, and the economy is in equilibrium.
• E)aggregate planned expenditure is less than real GDP, and firms increase production.

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Definitions:

Fixed Overhead

Represents the regular, recurring costs associated with operating a business that do not vary with production volume, essentially an alternate term to Fixed Costs but specifically related to manufacturing overhead.

Budget Variance

The difference between the budgeted amounts of expense or revenue and the actual amounts incurred or earned.

Standard Cost

A predetermined cost of manufacturing a product or providing a service, used as a benchmark to measure actual performance against.

Budgeted Overhead

The projected or estimated indirect costs related to the operation of a business, which could include utilities, rent, and salaries.