The Traditional Phillips Curve Suggests That, If Government Uses an Expansionary

question 114

Multiple Choice

The traditional Phillips Curve suggests that, if government uses an expansionary fiscal policy to stimulate output and employment,

• A) unemployment may actually increase because of the crowding-out effect.
• B) tax revenues may increase even though tax rates have been reduced.
• C) the inflation rate will increase.
• D) the natural rate of unemployment may fall.

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Definitions:

Incremental Fixed Overhead

The fixed costs that will change as a direct result of a decision made by a company.

Self-Constructed Asset

An asset that is built, manufactured, or produced internally by a company, rather than purchased from an external source.

Allocated Fixed Overhead

Allocated fixed overhead refers to the portion of fixed overhead costs assigned to a particular cost object, such as a product or department, based on a chosen method of allocation.

Appraised Fair Value

Appraised fair value is the estimation of an asset's worth at a particular time, based on expert analysis and market conditions.