Refer to the Graph Shown

question 19

Multiple Choice

Refer to the graph shown. Suppose the government borrows $50 million to finance an increase in its spending and that as a result, the level of investment is reduced by $50 million. In this case, the aggregate demand curve will:

• A)shift from AD₀ to AD₂ but then back to AD₁.
• B)shift from AD₀ to AD₂ but then out to AD₃.
• C)shift from AD₀ to AD₂.
• D)not shift.

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Definitions:

Sales Discounts

A promotional strategy where the seller reduces the price of products or services to attract more customers or encourage quick payment.

Sales Tax

A percentage of the selling price of goods and services, collected by sellers and remitted to the appropriate tax authority.

Liability Account

An accounting record that captures the amounts a company owes to others.

Gross Sales

represent the total sales revenue before any deductions are made for returns, allowances, or discounts.