Other Things Being Constant, What Will Be the Effect of Each

question 6

Essay

Other things being constant, what will be the effect of each of the following upon the equilibrium level of GDP?
(a) An increase in the amount of liquid assets consumers are holding;
(b) A sharp rise in stock prices;
(c) A rapid upsurge in the rate of technological advance; and
(d) A sharp increase in the interest rate.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including costs of indirect materials, indirect labor, and other indirect expenses.

Direct Labor-Hours

The cumulative hours employees dedicate to directly participating in the creation of a product or the provision of a service.

Overhead Rate

The ratio used to allocate overhead costs to products or services, often based on direct labor hours or costs.

Direct Labor

The cost of wages, salaries, and benefits for employees directly involved in the production of goods or services.