Explain the Effects of the Following Actions on Equilibrium Income

question 25

Essay

Explain the effects of the following actions on equilibrium income.
1.Government purchases rise by $20 billion.
2.Taxes fall by $20 billion.

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Definitions:

Manufacturing Overhead

Indirect factory-related costs that are not directly tied to the production of a specific product, such as the cost of maintaining factory equipment.

Product Costs

The costs directly related to the creation of a product, including raw materials, labor, and overhead.

Direct Materials

Raw materials that can be directly traced to the production of a specific product and are considered a variable cost.

Direct Labor

Labor costs associated directly with the manufacturing of goods or delivery of services, typically including wages of workers who physically produce a product.