Choose the Statement That Best Describes the Effects of the LIFO

question 54

Multiple Choice

Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.

• A)During periods of falling prices, LIFO gives the highest gross profit and the lowest closing inventory value.
• B)During periods of rising prices, LIFO gives the highest gross profit and the lowest closing inventory value.
• C)During periods of rising prices, LIFO gives the lowest gross profit and the lowest closing inventory value.
• D)None of the above.

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Definitions:

National Debt

The complete figure representing the debt a national government holds from borrowing, which is still outstanding.

Recessionary Gap

The difference between the actual level of GDP and the potential GDP that could be produced if all resources were fully employed, indicating an economy is not reaching its full output potential.

Fiscal Policy

Government decisions on taxation and spending to influence the economy, aiming to manipulate demand, inflation, and economic activity.

Monetary Policy

A central bank's management of money supply and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.