In Year 1, the Full-Employment Budget Showed a Deficit of $100

question 25

Essay

In Year 1, the full-employment budget showed a deficit of $100 billion and the actual budget showed a deficit of $150 billion.In Year 2, the full employment budget showed a deficit of $125 billion and the actual budget showed a deficit of $150 billion.Based on the data, what can be concluded about the direction of fiscal policy and the performance of the economy between Years 1 and 2?

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Definitions:

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead incurred.

Direct Labor Costs

Expenses associated with the work directly done by employees on the company's products or services.

Job Order Costing

An accounting system that accumulates costs by individual jobs or orders, suitable for customized or distinct products and services.

Predetermined Overhead Rate

The rate estimated before the start of a period, used to allocate manufacturing overhead costs to products based on a chosen activity base.