Suppose That the Government Decreases Its Expenditures on Goods and Services

question 191

Multiple Choice

Suppose that the government decreases its expenditures on goods and services. Within the AS-AD Model, the result will be in real GDP and in the price level.

• A) a decrease; an increase
• B) an increase; a decrease
• C) an increase; an increase
• D) a decrease; a decrease

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Definitions:

Capital Account

An account on a national level that records transactions of assets, liabilities, and investments between domestic and foreign entities.

Understated

A term used when financial records show a figure to be less than the actual amount, indicating a discrepancy or error.

Asset Account

Accounts that represent the different types of resources owned by a business, which have economic value and can provide future benefits.

Liability Account

records and tracks obligations or debts that a company owes to others, such as loans, mortgages, accounts payable, and other financial liabilities.