Government Spending Affects Aggregate Demand Directly, and Tax Changes Affect

question 181

Multiple Choice

Government spending affects aggregate demand directly, and tax changes affect aggregate demand indirectly.Therefore, changes in

• A)taxes are ineffective in changing aggregate demand.
• B)government spending affect aggregate demand more quickly than changes in taxes.
• C)taxes are virtually useless as a stabilization tool.
• D)government spending should be used with great caution.

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Definitions:

Departmental Income Statement

An income statement that shows the financial performance of different departments within a company.

Net Income

The total profit of a company after all revenues and gains are accounted for and all expenses and losses are deducted.

Direct Expense

Costs that can be directly traced to a specific product, service, or department, and is a key factor in the cost of goods sold.

Indirect Expense

Costs that are not directly attributable to a specific cost object, such as a product or service.