Fiscal Policy Can Shift

question 3

Multiple Choice

Fiscal policy can shift:

• A)aggregate demand only.
• B)both aggregate demand and potential output.
• C)both aggregate demand and short-run aggregate supply, but not long-run aggregate supply.
• D)only short-run functions.

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Definitions:

Fixed Expenses

Costs that do not change in total regardless of the level of production or sales activity, such as rent and salaries.

Net Income

The total profit or loss of a company after all expenses, including taxes and operating costs, have been subtracted from revenues.

Break-Even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.

Direct Materials

The raw materials that are directly traceable to the manufacturing of a product and are integral to its production.