According to the Keynesian View, If Real GDP Is Slowing

question 58

Multiple Choice

According to the Keynesian view, if real GDP is slowing and the economy appears to be headed for a recession, a reduction in tax rates is

• A) highly appropriate because it will stimulate aggregate demand and, thereby, help to strengthen the economy.
• B) highly inappropriate because it will either reduce the size of the budget surplus or increase the size of the deficit.
• C) not very important because the "demand stimulus effects" of the tax cut will be largely offset by additional borrowing.
• D) not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future.

---

Definitions:

Direct Materials Purchases Variance

the difference between the actual cost of direct materials purchased and the expected (or standard) cost, indicating how effectively a company is managing its resources.

Standard Labor-Hours

A pre-determined measure of the amount of labor time expected to complete a single unit of production or perform a task, often used in cost accounting.

Standard Amount

A benchmark or norm for measuring performance, often used in budgeting and accounting to set expected costs or outputs.

Variable Manufacturing Overhead

Refers to the production costs that change in proportion to the amount of production output, excluding direct materials and direct labor costs.