Which of the Following Fiscal Policy Changes Would Be the Most

question 250

Multiple Choice

Which of the following fiscal policy changes would be the most contractionary?

• A)a $40 billion increase in taxes
• B)a $10 billion increase in taxes and a $30 billion cut in government spending
• C)a $20 billion increase in taxes and a $20 billion cut in government spending
• D)a $30 billion increase in taxes and a $10 billion cut in government spending

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Definitions:

Break-Even Point

The sales level at which a company neither makes a profit nor incurs a loss.

Degree Of Operating Leverage

A measure of how much a company's operating income can increase with a given increase in sales. It highlights the sensitivity of a company's operating income to changes in sales.

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased as a percentage of its previous value, often used to measure growth rates or changes in financial metrics.

OCF

Operating Cash Flow, which is the cash generated by normal business operations.