Use the Following to Answer Questions

question 139

Multiple Choice

Use the following to answer questions:
-(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in government spending, holding everything else constant, which outcome is likely to occur?

• A) an increase in the nominal GDP
• B) an increase in the real GDP
• C) an increase in the unemployment rate
• D) an increase in the inflation rate

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Definitions:

Common Stock

Common stock represents ownership shares in a company, giving holders voting rights and a claim on dividends.

Operating Cash Flow

The amount of cash generated by a company's regular business operations, indicating its ability to cover operational costs and investments.

Business Activities

Business activities encompass all actions undertaken by a company to produce goods, provide services, or otherwise create economic value.