If the Current Equilibrium Output Lies Above Potential Output, Then

question 67

Multiple Choice

If the current equilibrium output lies above potential output, then an appropriate fiscal policy would be to _____, which will shift the AD curve to the _____.

• A) decrease government purchases; right
• B) increase government purchases; left
• C) decrease government purchases; left
• D) raise tax rates; right

---

Definitions:

Ending Inventory

The sum total of items ready for sale calculated at the end of an accounting cycle.

Periodic System

An inventory system where updates to inventory accounts are made periodically at the end of a reporting period, rather than continuously, often requiring physical counts.

Average Cost Method

An inventory valuation method that calculates the cost of goods sold and ending inventory value based on the average cost of all items in inventory.

Ending Inventory

The inventory that remains unsold at the end of an accounting period.