Whenever Total Planned Expenditures Differ from Real GDP

question 364

Multiple Choice

Whenever total planned expenditures differ from real GDP

• A) unplanned inventories will remain unchanged.
• B) unplanned inventories will change.
• C) government spending will adjust.
• D) tax revenues will move the economy back to equilibrium.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor, in contrast to fixed costs which remain constant regardless of production level.

Transfer Price

The price charged for goods or services transferred between departments or subsidiaries within the same company.

Opportunity Cost

The price paid for not choosing the subsequent optimal alternative during decision-making.

Lost Contribution Margin

The profit forgone by not manufacturing or selling a product, represented by the contribution margin that would have been earned on each unit.