Suppose Policy Makers Implement an Unexpected Fiscal Expansion

question 36

Multiple Choice

Suppose policy makers implement an unexpected fiscal expansion.Further assume that monetary policy is expected to keep interest rates constant in response to this unexpected fiscal expansion.Given this information,we would expect that

• A)stock prices will rise.
• B)stock prices will remain constant.
• C)this policy will have an ambiguous effect on stock prices.
• D)the effect on stock prices will depend on the slope of the IS curve.

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Definitions:

Overhead

Indirect costs associated with running a business that are not directly tied to a specific product or service, such as rent and utilities.

Variable Factory Overhead Controllable Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead expenses expected, which can be controlled or influenced by management.

Standard Factory Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a certain base such as labor hours or machine hours.

Direct Labor Hour

A measure of the amount of time an employee spends producing goods or services, directly associated with the product's cost.