The Reason a Shock to One Sector Can Spread to the Whole

question 33

Multiple Choice

The reason a shock to one sector can spread to the whole economy is that

• A) a decrease in production in one sector leads to an overall decrease in spending
• B) firms will need to help bail out other firms that are having troubles
• C) an increase in production in one sector will lead to an overall decrease in spending
• D) most shocks are not sector-specific but economy-wide
• E) workers laid off in the one sector will purchase more goods in another sector

Understand and apply the principles of transaction analysis and journal entry preparation.

Correctly identify accounts to be debited and credited in given transactions.

Analyze and correct erroneous accounting entries and understand their impact on financial statements.

Understand the law of one price and its application in comparing goods prices internationally.

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Definitions:

Demand Variability

Refers to the extent to which demand for a product or service can fluctuate over a certain period, affecting inventory levels, production planning, and supply chain management.

Operating Costs

Expenses associated with the day-to-day functions of a business, not including the production of goods or services.

Input Price Variability

Fluctuations in the cost of inputs, such as raw materials and labor, that can affect a business's operational expenses and profitability.

Interest Rates

The percentage of principal charged by the lender for the use of its money, affecting loans, mortgages, and savings.