If Congress Votes to Increase Government Purchases and at the Same

question 122

Multiple Choice

If Congress votes to increase government purchases and at the same time decreases personal income taxes, they

• A)have decided to balance the federal budget.
• B)have voted for the proper policy to counteract a recessionary gap.
• C)have voted for the proper policy to counteract an inflationary gap.
• D)are trying to achieve a federal budget surplus.

---

Definitions:

Federal Deficit

The fiscal year difference when the U.S. Government's expenditures exceed its revenues, necessitating borrowing to cover the gap.

Real GDP

The measure of a country's economic output adjusted for inflation, reflecting the true value of goods and services produced.

Loanable Funds

A concept in economics that describes the market where borrowers obtain funds from savers, influenced by interest rates.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, paid by the borrower to the lender for the use of their funds.