Fiscal Policy Is Government Action to Influence Aggregate Demand and in Turn

question 21

Multiple Choice

Fiscal policy is government action to influence aggregate demand and in turn to influence the level of real GDP and the price level, through:

• A) expanding and contracting the money supply.
• B) regulation of net exports.
• C) changes in government spending and/or tax revenues.
• D) encouraging businesses to invest.

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Definitions:

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.

Dollar Contribution Margin

The difference between total sales revenue and total variable costs, expressed in absolute currency terms.

Variable Cost

Costs that change in proportion to the level of production activity or volume, such as raw material costs and direct labor costs.