Which of the Following Explains Why the Government Should Not

question 14

Multiple Choice

Which of the following explains why the government should not increase spending by the entire amount of the AD shortfall to move the economy to full employment?

• A)Price level changes will make up for the difference between the fiscal stimulus and the AD shortfall.
• B)The multiplier process will contribute to an additional increase in aggregate demand that will cause an inflationary gap.
• C)The government can increase taxes to create an additional increase in aggregate demand.
• D)The price level is constant.

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Definitions:

Spans of Control

Refers to the number of subordinates a supervisor or manager can effectively manage and oversee.

Divided Labour

The breakdown of work into smaller, specialized tasks to increase efficiency, also known as division of labor.

Coordinate

To organize different elements or activities efficiently so they work well together and achieve a desired outcome.

Highly Centralized

A structural approach in organizations where decision-making authority is concentrated at the top levels of management.