A Key Assumption of the Short-Run Model Is

question 35

Multiple Choice

A key assumption of the short-run model is:

• A) zero inflation.
• B) perfect price flexibility.
• C) that unemployment always equals its natural rate.
• D) that the economy never deviates from its long-run equilibrium.
• E) sticky inflation.

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Definitions:

Favorable Variances

Differences between expected and actual financial performance that result in better-than-expected profitability or cost savings.

Standard Costs

Represents the expected cost of producing or purchasing items, used for budgeting and cost control purposes.

General Ledger

A ledger that contains all asset, liability, and owner’s equity accounts.

Normal Standards

Predetermined costs or benchmarks that are established based on the historical performance and expected future costs, used to measure production efficiency and budget compliance.