(Figure: Aggregate Demand and Supply) the Above Graph Depicts an Economy

question 177

Multiple Choice

(Figure: Aggregate Demand and Supply) The above graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. The movement from point a to point b is due to:

• A) increased consumer spending brought about by increased government spending and/or lower taxes.
• B) workers and suppliers adjusting their expectations to lower price levels.
• C) workers and suppliers adjusting their expectations to higher price levels.
• D) decreased consumer spending brought about by increased government spending and/or lower taxes.

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Definitions:

Depreciation Rate

The percentage rate at which an asset is depreciated across its useful life, affecting the value of the asset on the balance sheet over time.

Straight-Line Method

A method of calculating depreciation by dividing the cost of an asset, minus its salvage value, by its useful life.

Residual Value

The estimated scrap or salvage value of an asset at the end of its useful life.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value of the asset over time due to use, wear, or obsolescence.