Refer to the Graph Above

question 120

Multiple Choice

Refer to the graph above. The ratchet effect would suggest that:

• A) If AD₁ shifts to AD₂, the economy would move to point b
• B) If AD₁ shifts to AD₂, the economy would move to point c
• C) If AD₂ shifts to AD₁, the economy would move to point c
• D) If AD₂ shifts to AD₁, the economy would move to point b

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Definitions:

Budgeted Sales

Projected revenue from goods or services sold, as estimated during a company's budgeting process.

Manufacturing Overhead Budget

An estimation of all manufacturing costs excluding direct materials and direct labor, planned for a specific period.

Direct Labor-Hour

A measure of the amount of time, typically in hours, that direct labor work directly on producing goods.

Budgeted Overhead

An estimate of all costs associated with production that are not direct labor or direct materials costs, projected for a specific period.