FIGURE 22-5 -Refer to Figure 22-5,Diagram 1.Which of the Following Fiscal Policy

question 120

Multiple Choice

FIGURE 22-5
-Refer to Figure 22-5,Diagram 1.Which of the following fiscal policy measures could the government implement to return national income to the full-employment level of GDP (potential output,Y*) ?

• A)reduce government spending
• B)increase transfer payments
• C)reduce taxes
• D)increase government spending
• E)increase disposable income

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Definitions:

Absorption Costing

An accounting method where all manufacturing costs, both fixed and variable, are attributed to the production of products.

Variable Costing

A costing method in which variable manufacturing costs are included in product costs, while fixed manufacturing costs are treated as period costs.

Absorption Costing

An accounting method that assigns all manufacturing costs, both variable and fixed, to products, thereby impacting the inventory valuation on the balance sheet.

Net Operating Income

The profit a company makes from its operations, calculated as total revenue minus operating expenses, excluding taxes and interest.