In an Effort to Balance the Federal Budget, an Increase

question 41

Multiple Choice

In an effort to balance the federal budget, an increase in Social Security taxes is passed.What is the most likely effect of this on equilibrium GDP?

• A)GDP will increase.
• B)GDP will decrease.
• C)GDP will not change but prices will rise.
• D)GDP will not change but employment will increase.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, depreciation, and salaries for production supervisors.

Direct Labor

The wages of those persons whose efforts directly affect the quality or other characteristics of the products manufactured.

Raw Materials

Basic materials used in the manufacturing process to produce finished goods, not yet processed or used in production.

Selling And Administrative Costs

Expenses related to the selling of products and the administrative aspects of a business, excluding production costs.