If the Actual Unemployment Rate Is Less Than the Natural

question 143

Multiple Choice

If the actual unemployment rate is less than the natural rate of unemployment, there will be a tendency toward:

• A)​increased inflation and a leftward shift of the short-run Phillips curve.
• B)​decreased inflation and a rightward shift of the short-run Phillips curve.
• C)​increased inflation and a rightward shift of the short-run Phillips curve.
• D)​decreased inflation and a leftward shift of the short-run Phillips curve.

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its revenues, highlighting the impact of fixed costs on profitability.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating how much each unit sold contributes to fixed costs and profit.