In the Short Run, an Increase in Government Expenditure Will

question 319

Multiple Choice

In the short run, an increase in government expenditure will
I. shift the aggregate demand curve rightward.
II. increase real GDP.
III. increase the government expenditure multiplier.
IV. increase the autonomous tax multiplier.

• A) III and IV
• B) I and II
• C) I and III
• D) I, II and III

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Definitions:

Total Cost Function

A mathematical relationship expressing the total cost of production as a function of the quantity of output.

Explicit Costs

Direct, out-of-pocket payments for wages, rent, materials, and other inputs required for the production of goods or services.

Implicit Costs

The opportunity costs of utilizing resources owned by the firm that could have been employed elsewhere, not directly paid out in cash.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a decreased cost per unit.