There Is an Increase in Aggregate Demand, and Firms Do

question 42

Multiple Choice

There is an increase in aggregate demand, and firms do not have sufficient capital and labor to support an output increase. In this case, inventory stocks will

• A) continue to fall, and there will be a large increase in the price level.
• B) continue to increase, and there will be a large increase in the price level.
• C) continue to fall, and the price level will fall.
• D) remain unchanged, and the price level will remain unchanged.

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Definitions:

Job Cost

A method used in accounting to track the costs associated with a specific job or order, capturing materials, labor, and overhead expenses.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to apply manufacturing overhead to products or job orders.

Direct Labor-hours

The total hours worked by employees who are directly involved in the manufacturing or production process of goods.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated based on estimated costs and activity levels.