A Decrease in Government Spending Would Cause All but One

question 151

Multiple Choice

A decrease in government spending would cause all but one of the following to happen.Which is the exception?

• A) The government's budget deficit would shrink.
• B) The interest rate would decrease.
• C) Consumption spending would increase.
• D) Investment spending would increase.
• E) Total output would decrease.

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Definitions:

Total Cost Approach

A method of analysis that involves assessing all costs associated with a decision, including initial costs and ongoing operational costs.

Discount Rate

The interest rate used in discounting future cash flows to present value, often reflecting the cost of capital or risk level.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in evaluating investment opportunities.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, representing the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero.