Suppose There Is an Increase in Government Spending

question 9

Multiple Choice

Suppose there is an increase in government spending. Such a fiscal policy action will cause:

• A) the natural level of output to rise.
• B) the natural level of output to fall.
• C) ambiguous effects on the natural level of output.
• D) no effect on the natural level of output.
• E) the natural level of output rises when the natural real interest rate falls.

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Definitions:

Quality Performance

The degree to which a product or service meets customer expectations and industry standards.

Internal Failure Costs

Costs incurred to rectify defects found before the delivery of a product to the customer, part of quality control expenses.

Defective Products

Items that fail to meet quality standards or specifications and are therefore unsuitable for sale or use.

Services

Activities provided by one party to another, often in exchange for payment, which do not result in ownership of anything. They are intangible and can vary greatly in nature.