If Congress Votes to Increase Government Purchases and at the Same

question 22

Multiple Choice

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

• A) have decided to balance the federal budget.
• B) have voted for the proper policy to counteract a recession.
• C) have voted for the proper policy to counteract inflation and an economic boom.
• D) are trying to achieve a federal budget surplus.

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Definitions:

Contribution Margin Ratio

A ratio that shows the contribution margin as a percentage of total sales, indicating how much of the revenue is available to cover fixed costs and generate profit.

Fixed Expenses

Expenses that do not fluctuate with changes in production volume or sales, such as rent and salaries.

Variable Expenses

Costs that change in proportion to the level and nature of business activity, such as advertising, sales commissions, and shipping costs.

Cost Volume Profit Analysis

A managerial accounting technique used to determine the effects of changes in costs and volume on a company's profits.