If the Government Stimulates Aggregate Demand in Response to an Adverse

question 34

Multiple Choice

If the government stimulates aggregate demand in response to an adverse supply shock,

• A)the inflation rate will increase but frictional unemployment will decrease
• B)the unemployment rate will increase but the inflation rate will decline
• C)an increase in unemployment can be avoided but only at the cost of increased inflation
• D)high inflation can be avoided but the rate of unemployment will increase
• E)the inflation and unemployment rates will be reduced simultaneously

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Definitions:

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditures to the appropriate period.

Prepaid Expenses

Prepaid expenses are costs for goods or services that are paid in advance of the receipt or use, recognized as assets on a balance sheet.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, representing the wear and tear, or expiry of the asset's practical lifespan.

Billed

Billed refers to the issuing of invoices to customers for products sold or services rendered, indicating the amount due for payment.