The Ricardo-Barro Effect Holds That

question 67

Multiple Choice

The Ricardo-Barro effect holds that

• A)equal increases in taxes and government expenditures have no effect on equilibrium real GDP.
• B)a government budget deficit has no effect on the real interest rate.
• C)a government budget deficit crowds out private investment.
• D)a government budget deficit induces a decrease in saving that magnifies the crowding out effect.
• E)none of the above.

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Definitions:

Predetermined Rate

A rate calculated before the fiscal period begins, used to apply costs to production or operations, often based on labor hours or machine hours.

Predetermined Overhead Rate

A rate calculated at the beginning of the period, used to allocate overhead costs to products based on a specific activity base.

Machine Hours

Machine hours represent the total amount of time that machines are operating in a manufacturing or production process.

Direct Labour Hours

The total hours worked by employees directly involved in the production process, used to allocate labor costs to products or services.