When Actual Output Equals Potential Output and the Inflation Rate

question 35

Multiple Choice

When actual output equals potential output and the inflation rate is equal to the expected rate of inflation, the economy is said to be in ________ equilibrium.

• A)long-run
• B)recessionary
• C)expansionary
• D)short-run

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Definitions:

Break-even

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and the company has "broken even" on an investment or product.

Variable Selling Costs

Variable selling costs are expenses that vary directly with the level of production or sales volume, such as commissions and shipping charges.

Variable Production Costs

Costs that vary directly with the level of production output, such as raw materials and direct labor, contrasting with fixed costs that remain constant regardless of production volume.

Fixed Costs

Costs that do not fluctuate with the volume of production or sales, such as rent, salaries, and insurance premiums.