Assume That in the Long Run Input Prices Fully Adjust

question 88

Essay

Assume that in the long run input prices fully adjust to changes in output prices. Use a diagram to indicate the effect of an expansionary fiscal policy on the price level and equilibrium level of output in the long run.

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Definitions:

Applied Manufacturing Overhead

The portion of manufacturing overhead costs allocated to each unit of production, based on a predetermined rate.

Applied Manufacturing Overhead

Applied Manufacturing Overhead refers to the estimated overhead costs assigned to individual products based on a predetermined rate and actual activity levels.

Overhead

The indirect costs of running a business that are not directly associated with the production of goods or services, such as administrative expenses and rent.

Underapplied

A situation where the allocated or budgeted costs are less than the actual costs incurred, typically in the context of manufacturing overhead.