The Initial Effect of an Increase in the Share of Government

question 77

Multiple Choice

The initial effect of an increase in the share of government purchases is

• A)a decline in the share of GDP available for nongovernment purchases.
• B)an increase in the share of GDP available for nongovernment purchases.
• C)a decrease in interest rates.
• D)an increase in interest rates.
• E)a decrease in the nongovernment share of GDP.

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Definitions:

Real Expenditures

Total spending on goods and services, adjusted for inflation, to reflect the true economic value of transactions.

Medicare

A federal health insurance program in the United States for people who are 65 or older, some younger individuals with disabilities, and people with End-Stage Renal Disease.

Medicaid

A social health care program for families and individuals with low income and resources, principally funded by the federal government and the states.

Government Subsidies

Financial assistance provided by the government to individuals, organizations, or industries to encourage or support certain activities or reduce their costs.