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Using aggregate demand and aggregate supply curves, graphically illustrate the effect of an increase in government spending on the price level and equilibrium level of output in the long- run. Assume that the economy is initially in long- run equilibrium at full employment.
Relevant Range
The range of activity within which assumptions about variable and fixed cost behavior are valid.
Variable Cost
Expenses that change in proportion to the volume of goods or services produced by a business.
Activity
An event that causes the consumption of overhead resources in an organization.
Cost Driver
A factor that causes a change in the cost of an activity, such as machine-hours or labor hours, used in determining pricing and profitability.
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