According to the Keynesian View, an Unanticipated Reduction in Spending

question 24

Multiple Choice

According to the Keynesian view, an unanticipated reduction in spending will

• A) increase the demand for goods and services.
• B) raise business inventories and lead to a decline in output.
• C) lead to lower interest rates, which will stimulate aggregate demand and keep the economy at full employment.
• D) lead to a lower price level, which will quickly guide the economy to full-employment equilibrium.

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Definitions:

Liability

Financial debts or obligations that arise during the course of business operations, needing to be settled over time.

Bond Interest Expense

Represents the cost incurred by an entity for borrowing funds through the issuance of bonds, calculated as the bond's face value multiplied by the interest rate.

Issued At

Refers to the price or condition under which securities, such as bonds or stocks, are made available for sale when they first come to market.

Journal Entry

The transaction (debits and credits) that is recorded into the journal once it is analyzed.