In Response to Some Unexpected Changes in Demand

question 47

Multiple Choice

In response to some unexpected changes in demand:

• A)the economy could always adjust its production level if the prices are inflexible.
• B)the economy would always produce less than what was expected if the prices of goods and services are inflexible.
• C)the economy could always produce at its optimal capacity if the prices of goods and services are inflexible.
• D)the economy could always produce at its optimal capacity if the prices of goods and services are fully flexible.

---

Definitions:

Employer Payroll Taxes

Taxes that employers are required to pay on behalf of their employees, which may include Social Security, Medicare, and unemployment taxes.

Gross Earnings

Total compensation earned by an employee.

Direct Labor Hour

A measure of labor input, which is the time spent by workers directly manufacturing a product.

Direct Materials

Direct materials are raw materials that are directly used in the manufacturing process of a product and are easily traceable to it.