Utilizes Relevant Data to Support Positions Model and GDP 13. If the economy is at equilibrium on AD2, policies that increase AD will a) Increase prices, but not Real GDP b) Increase prices and increase Real GDP c) Decrease prices and Real GDP d) Have no effect on the price level 14. If the economy is at equilibrium on AD4, the best policy for maintaining full employment would be a) Contractionary policies to decrease AD b) Expansionary policies to increase AD c) Increase government spending d) Do nothing to change AD Solution (13) If the economy is in equilibrium at AD2, then it is in the Keynesian range of aggregate supply. If AD is increased now, it will increase the price level & increase real GDP (upto AD4, where the classical AS range starts). Correct option (b) (14) At AD4, any change in AD will only change price, but not output. So nothing should be done to change AD. Correct option (d).

1. Utter Company does not divide costs into fixed and variable components. Personnel costs are
allocated based on the number of employees, and maintenance costs are allocated based on
machine hours. Predetermined overhead rates for fabrication and assembly are based on direct
labor hours. What is the amount of maintenance costs allocated to the Assembly Department
using the direct method? (Round amounts to dollars.)
Solution