In an Aggregate Expenditures Diagram, Equal Increases in Government Spending

question 190

Multiple Choice

In an aggregate expenditures diagram, equal increases in government spending and in lump-sum taxes will

• A)shift the aggregate expenditures line downward.
• B)shift the aggregate expenditures line upward.
• C)leave the aggregate expenditures line unchanged.
• D)reduce the equilibrium GDP.

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Definitions:

Break-even Sales

The amount of revenue needed to cover a business's total fixed and variable costs, marking the point at which a business neither makes a profit nor a loss.

Unit Variable Cost

The cost associated with producing one additional unit of a product, varying with the volume of production.

Wage Contract

An agreement between an employer and an employee that stipulates the terms of employment, including pay rate and job responsibilities.

Variable Costs Per Unit

Costs that vary with the level of production or sales volume, calculated on a per-unit basis.