Exhibit 15-4  Aggregate Demand and Supply Model Suppose the Economy

question 155

Multiple Choice

Exhibit 15-4  Aggregate demand and supply model Suppose the economy in Exhibit 15-4 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to point E₂ and reduce inflation by:

• A) decreasing government tax revenue by $100 billion.
• B) decreasing government tax revenue by $750 billion.
• C) increasing government tax revenue by $100 billion.
• D) increasing government tax revenue by approximately $33 billion.
• E) decreasing government tax revenue by approximately $33 billion.

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Definitions:

Job Cost

The total expense calculated for a specific job or project, including materials, labor, and overhead.

Unit Product Cost

The total cost to produce one unit of product, including labor, materials, and overhead.

Predetermined Overhead Rate

A rate calculated prior to the accounting period that is used to allocate overhead costs to products or job orders, based on estimated overhead costs and an allocation base.

Job-Order Costing

A cost accounting system that accumulates costs according to specific jobs or orders, allowing for detailed cost tracking.