Starting from Potential Output, If Consumer Confidence Decreases and Consumers

question 43

Multiple Choice

Starting from potential output, if consumer confidence decreases and consumers decide to spend less, then this will shift the ______ curve to the left and generate ______.

• A)aggregate demand; a recessionary output gap
• B)aggregate supply; a recessionary output gap
• C)aggregate demand; an expansionary output gap
• D)aggregate supply; an expansionary output gap

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Definitions:

Variable Administrative Expense

Costs associated with administrative activities that vary with the level of business activity or output.

Reclassifying Costs

The process of moving costs from one category to another in accounting records.

Period Costs

Expenses that are not directly tied to production and are expensed in the period in which they occur, such as selling and administrative expenses.

Product Costs

Expenses directly associated with the creation of a product, including materials, labor, and factory overhead.