Refer to the Graph Below

question 112

Multiple Choice

Refer to the graph below.Assume that the economy is in initial equilibrium where AS₁ intersects AD₁.Then a supply shock occurs that shifts AS₁ to AS₂.If the government counters with an expansionary fiscal policy that shifts AD₁ to AD₂, then it is most likely that:

• A)AD₂ will shift to AD₁.
• B)AS₂ will shift to AS₁.
• C)AS₂ will shift to AS₃.
• D)AS₂ will shift to AS₃ and AD₂ will shift to AD₁.

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Definitions:

Variable Manufacturing Overhead

Costs that fluctuate with the level of production output, such as utilities or materials that vary with production volumes.

Direct Labor-hours

The total amount of time spent by workers directly involved in the manufacturing of a product.

Variable Overhead Standards

The budgeted or standard costs associated with variable overheads, which are expected to change in proportion to different levels of production activity.

Direct Labor-hours

Represents the total hours of labor directly involved in manufacturing a product or delivering a service.