What Is the Outcome If Spending by the Federal Government

question 111

Multiple Choice

What is the outcome if spending by the federal government exceeds revenue?  

• A) The price level tends to fall. 
• B) The aggregate demand curve shifts leftward. 
• C) The aggregate supply curve shifts rightward. 
• D) A federal budget deficit occurs.

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Definitions:

Open Market

An open market refers to an unrestricted market with a wide array of economic participants and transactions where goods, services, and financial assets can be traded freely.

Money Supply

This is the total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Discount Rate

The interest rate charged by central banks on loans offered to commercial banks or other financial institutions.

Reserve Requirement

The minimum percentage of deposits that banks are required to hold in reserve rather than lend out, set by central banking authorities to help control the money supply.