A Fiscal Contraction Will Tend to Cause Which of the Following

question 43

Multiple Choice

A fiscal contraction will tend to cause which of the following to occur?

• A)a reduction in the interest rate and a reduction in investment
• B)a reduction in the interest rate and an upward shift in the LM curve
• C)a reduction in the interest rate and an ambiguous effect on investment
• D)no change in output if the Fed simultaneously pursues contractionary monetary policy

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Definitions:

Income Summary

An account in which revenues and expenses are summarized, showing the net income or loss for a specific period before closing entries are made.

Net Income

Net income is the total revenue minus total expenses of a business, showing the company's profit during a specific period.

Correcting Entries

Journal entries made to amend previously recorded transactions that were incorrect or incomplete.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell it to customers, and collect the cash from these sales.