When a Macroeconomic Aggregate Is Procyclical

question 3

Multiple Choice

When a macroeconomic aggregate is procyclical

• A) it grows faster than GDP.
• B) its deviations from trend generally change before the deviations from trend in GDP do.
• C) its deviations from trend generally change more that the deviations from trend in GDP.
• D) its deviations from trend are more often of the same sign as the deviations from trend in GDP.

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Definitions:

Fixed Costs

Expenses that remain constant regardless of production or sales levels, like lease payments, wages, and coverage plans.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials or commission on sales.

Fixed Expenses

Costs that do not change with the level of production or business activity.

Unit Contribution Margin

The amount by which the selling price of a unit exceeds its variable costs, indicating how much it contributes to covering fixed costs and generating profit.