Which of the Following Costs Are Relevant to Aggregate Operations

question 7

Multiple Choice

Which of the following costs are relevant to aggregate operations planning?

• A) Sunk costs
• B) Transaction costs
• C) Backordering costs
• D) Legal costs
• E) Fixed costs

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Definitions:

Corporate Profits

The surplus income of corporations after all expenses have been met, indicative of corporate health.

Inflationary Gap

Occurs when equilibrium GDP is greater than full-employment GDP.

Equilibrium GDP

The level of Gross Domestic Product where aggregate supply equals aggregate demand, indicating a stable economy with no tendency for change in the price level or output.

Multiplier

Any change in spending (C, I, or G) will set off a chain reaction leading to a multiplied change in GDP. Equation is 1/(1 - MPC).