The Short-Run Effect of an Increase in Government Purchases Is

question 98

Multiple Choice

The short-run effect of an increase in government purchases is

• A)a rightward shift of the aggregate demand curve and an upward shift of the inflation adjustment line.
• B)a leftward shift of the aggregate demand curve and an upward shift of the inflation adjustment line.
• C)a rightward shift of the aggregate demand curve and a downward shift of the inflation adjustment line.
• D)a rightward shift of the aggregate demand curve and movement along the inflation adjustment line.
• E)a leftward shift of the aggregate demand curve and movement along the inflation adjustment line.

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Definitions:

Cash Savings

Funds that have been preserved as a reserve and are readily available for use when needed.

Required Rate Of Return

The minimum expected rate of return on an investment, necessary to compensate for the risk undertaken, varying between investments.

Salvage Value

The projected remaining worth of an asset when it reaches the end of its operational lifespan.

Net Present Value

A method used in capital budgeting to calculate the value of an investment by discounting future cash flows back to their present value, to assess its profitability.