Explain Why the Tax Multiplier Is Different from the Government

question 94

Essay

Explain why the tax multiplier is different from the government purchases multiplier,in both sign and relative magnitude.

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Definitions:

Direct Labor Time Variance

The difference between the estimated time to produce a good or service and the actual time taken, multiplied by the hourly labor rate.

Direct Labor

This references the cost of labor that can be directly attributed to the manufacture or production of specific goods or services.

Cost Variance

The difference between the expected (budgeted) cost of an activity and the actual cost incurred, used in budgeting and financial reporting to monitor performance.

Standard Cost

A predetermined cost of manufacturing, projecting what each product should cost under normal conditions.