An Inflationary Gap Caused by a Demand Shock Can Be

question 60

Multiple Choice

An inflationary gap caused by a demand shock can be addressed by _____ to _____.

• A) raising government spending; lower the unemployment rate
• B) raising taxes; lower the unemployment rate
• C) lowering government spending; lower the aggregate price level
• D) lowering taxes; lower the aggregate price level

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Definitions:

Asset Impairments

A reduction in the book value of an asset when its market value falls below its carrying amount on the balance sheet.

Fair Value

The estimated market price of an asset or liability based on current conditions and mutually informed buyer and seller transactions.

Construction in Progress Account

An account in the balance sheet that accumulates costs related to the construction of a long-term asset until the asset is ready for use, at which point the total cost is transferred to the fixed assets account.

GAAP

Generally Accepted Accounting Principles, which are a collection of commonly-followed accounting rules and standards for financial reporting.