When the Current Short-Run Equilibrium Is to the Right of the Long-Run

question 211

Multiple Choice

When the current short-run equilibrium is to the right of the long-run aggregate supply, appropriate discretionary fiscal policy used to address this problem would be to

• A) increase taxes.
• B) decrease taxes.
• C) increase government spending.
• D) decrease the discount rate.

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Definitions:

Raw Materials

The basic materials and components required at the start of the production process to manufacture goods.

Total Manufacturing Costs

The sum of all costs associated with producing a product, including direct materials, direct labor, and manufacturing overhead.

Period Cost

Costs that are expensed in the period in which they are incurred, not directly tied to the production process.

Manufacturing Overhead

All manufacturing costs that are not direct materials or direct labor, including indirect materials, indirect labor, and other production-related expenses.