If Total Production Is Greater Than Total Expenditures

question 166

Multiple Choice

If total production is greater than total expenditures,

• A) there will be an increase in saving.
• B) there will be an increase in inventories.
• C) firms will then increase production.
• D) firms will then increase prices.

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Definitions:

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes in the United States that allows faster write-offs of assets.

Straight-Line

A method of calculating depreciation of an asset, which allocates an equal amount of depreciation to each year of the asset's useful life.

Sum-Of-Years' Digits

A depreciation method that accelerates the expense recognition, using a decreasing fraction of years remaining over the sum of the years' digits.

Double-Declining Balance

A method of accelerated depreciation which doubles the normal depreciation rate, reducing the asset's book value more quickly in its early years.