Starting from Long-Run Equilibrium, a Large Tax Cut Will Result

question 86

Multiple Choice

Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

• A)expansionary; higher; potential
• B)expansionary; higher; higher
• C)recessionary; lower; lower
• D)recessionary; higher; potential

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Definitions:

Predetermined Overhead Rate

This rate is used to allocate overhead costs to products or services based on a specific formula, often involving direct labor hours or direct material costs, aiding in the budgeting and costing process.

Direct Labor Costs

The wages and related benefits paid to employees who are directly involved in the production of goods or the provision of services.

Factory Overhead Applied

Costs associated with the production process that are not directly tied to a specific product, such as depreciation or utilities, allocated to products based on a systematic approach.

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to individual units of production, based on a particular activity (e.g., machine hours, labor hours).