The Ricardo-Barro Effect Holds That

question 36

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)a government budget deficit increases the real interest rate.

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Definitions:

Factory Overhead Cost

Indirect manufacturing costs that are not directly tied to the production of specific goods, including utilities, maintenance, and salaries of supervisors.

Overapplied/Underapplied

Terms used in cost accounting to describe the situation where the allocated indirect costs do not match the actual indirect costs, resulting in a discrepancy at the end of an accounting period.

Factory Labor

Direct work performed in the factory that is actively involved in the manufacturing process of goods.

General Factory Use

Expenses related to the operation of a manufacturing plant or factory, which are not directly tied to individual units of production.