A Decrease in Government Purchases

question 83

Multiple Choice

A decrease in government purchases

• A)shifts the IS curve up and to the right,leading to a higher interest rate and an appreciation of the exchange rate.
• B)shifts the IS curve down and to the left,leading to a lower interest rate and a depreciation of the exchange rate.
• C)shifts the LM curve left,leading to a lower interest rate and a depreciation of the exchange rate.
• D)shifts the LM curve right,leading to a lower interest rate and a depreciation of the exchange rate.

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Definitions:

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often receiving dividends before common shareholders.

Annual Dividend

The total sum of the dividends paid to shareholders over a year, often cited per share.

Rates of Return

Financial results such as gains or losses on an investment over a predetermined time frame, expressed as a percentage of the original investment fee.

Net Cash Flows

The amount of cash that is generated or lost by a business in a given time period, calculated as cash inflows minus cash outflows.