Figure 12-1 -Refer to Figure 12-1. in This Situation, If Policymakers Want

question 79

Multiple Choice

Figure 12-1
-Refer to Figure 12-1. In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do?

• A) establish a consumption tax to encourage savings
• B) increase government spending
• C) loosen environmental regulations to lower businesses cost of production
• D) raise interest rates

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Definitions:

Total Variable Costs

The total of all costs that vary with the level of output, including costs for raw materials, labor, and energy, in the production process.

Average Fixed Costs

Fixed costs divided by the quantity of output produced, indicating the fixed cost per unit of output.

Constant Returns to Scale

The situation in which a proportional increase in all inputs leads to an equal proportional increase in output.

Wage Rate

The standard amount of compensation paid to an employee per unit of time worked, typically expressed on an hourly or monthly basis.