When the Price Level Falls

question 40

Multiple Choice

When the price level falls

• A)The interest rate falls because people will want to hold more money and so sell bonds.
• B)Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes.
• C)Both A and B are correct.
• D)None of the above are correct.

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Definitions:

Net Operating Income

The profit generated from a company's normal business operations after subtracting operating expenses from operating revenue.

Product Costs

Costs that are incurred to create a product that includes direct materials, direct labor, and manufacturing overhead.

Period Costs

Expenses that are not directly tied to the production process and are expensed in the period they are incurred.

Variable Cost

Expenses that change in proportion to the activity of a business such as costs of goods sold, raw materials, and labor expenses.