Which of the Following Statements Is True of Government Spending

question 35

Multiple Choice

Which of the following statements is true of government spending?

• A)An increase in government spending raises the equilibrium level of income by a multiple of the original spending increase.
• B)Government spending is a part of monetary policy, not fiscal policy.
• C)A decline in government spending brings about an expansion in the economy.
• D)Increase in government spending increases the recessionary gap in the economy.
• E)An increase in government spending shifts the aggregate demand curve downward by a fraction of the rise in government spending.

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Definitions:

Philippine Islands

An archipelago of over 7,000 islands in Southeast Asia, governed as a territory of the United States from 1898 until its independence in 1946.

Clayton-Bulwer Treaty

An 1850 agreement between the United States and Great Britain aiming to neutralize Central American territories and stipulate that neither nation would exclusively control a transoceanic canal.

Central American Canal

A concept referring to a canal through Central America, such as the Panama Canal, facilitating maritime trade between the Atlantic and Pacific Oceans.

Territorial Sovereignty

The right of a state to exercise supreme authority, including law enforcement and governance, within its territorial bounds.