A Country Reports That Unplanned Inventories Increased During 2014

question 8

Multiple Choice

A country reports that unplanned inventories increased during 2014. The increase in unplanned inventories leads to

• A) consumers increasing their consumption expenditure, which increases GDP.
• B) firms decreasing production, which decreases GDP.
• C) firms increasing production, which increases GDP.
• D) actual aggregate expenditure being different than real GDP.
• E) the government decreasing production, which decreases GDP.

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Definitions:

Activity-Based Costing

A costing method that allocates overhead costs based on each product's activities or consumption rather than a standard rate.

Capacity Analysis

The act of determining the amount of production capability needed by an organization to meet its products' shifting demands.

Activity-Based Costing

An accounting technique that pinpoints activities within a company and allocates the expenses of each activity to every product and service based on their actual usage.

Activity Cost Pool

A collection of all costs associated with a particular business activity or group of activities.