Exhibit 10-5 -According to the Graph in Exhibit 10-5,if the Price Level

question 94

Multiple Choice

Exhibit 10-5
-According to the graph in Exhibit 10-5,if the price level decreases,the new equilibrium level of real GDP must be

• A) less than $20
• B) less than $100
• C) unchanged
• D) greater than $100
• E) greater than $200

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Definitions:

Net Income

The net earnings of a business once all costs and taxes are subtracted from its total income.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, with fixed overhead treated as a period expense.

Absorption Costing

An accounting method that includes all manufacturing costs (fixed and variable) in the cost of a product.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been deducted from total revenue, often referred to as the bottom line.