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:

Expense Recognition

An accounting principle that dictates the conditions under which expenses are recognized and reported in financial statements.

Revenue Recognition

The principle that dictates the specific conditions under which revenue is recognized and recorded in the accounts.

Realization of Revenue

The realization of revenue occurs when a company has earned its revenue—typically through the delivery of goods or services—and it can be recognized on the financial statements.