The Government Purchases Component of Aggregate Demand Includes

question 19

Multiple Choice

The government purchases component of aggregate demand includes
I. all purchases by government agencies of goods and services produced by firms.
II. direct production by government agencies themselves.
III. government expenditures on transfer payments.

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, such as minerals, forests, water, and fertile land.

Economic Losses

Financial deficits that occur when costs exceed revenues, or when the economic value generated is less than the resources used.

Zero Economic Profit

A situation where total revenue equals total cost, meaning the firm is covering all its opportunity costs but is not making excess profit.

Potential Competitors

Businesses not currently in the market but have the potential to enter and compete.