Suppose the Economy Is in Long-Run Equilibrium

question 19

Multiple Choice

Suppose the economy is in long-run equilibrium.Concerns about pollution cause the government to significantly restrict the production of electricity.At the same time,taxes fall.In the short-run

• A)real GDP will rise,and the price level might rise,fall,or stay the same.
• B)real GDP will fall,and the price level might rise,fall,or stay the same.
• C)the price level will rise,and real GDP might rise,fall,or stay the same.
• D)the price level will fall,and real GDP might rise,fall,or stay the same.

Know the differences in reporting standards and practices under U.S. GAAP and IFRS, especially in terms of liquidity and balance sheet ordering.

Understand how the cash flow statement relates to changes in the balance sheet and the importance of investing activities.

Assess the significance of related party transactions and subsequent events in financial reporting.

Understand the concept and application of special order pricing to increase net income.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials and the expected cost, multiplied by the quantity of materials used.

Variable Overhead

Costs of indirect materials, indirect labor, and other operations that fluctuate with the level of production output.

Direct Labor-Hours

A measure of the amount of time workers spend directly manufacturing a product or performing a service.

Materials Quantity Variance

The variance arising from the actual amount of materials utilized in manufacturing compared to the anticipated standard quantity, times the standard expense for each unit.