Why Might an Expansion in Government Spending Increase the Severity

question 130

Multiple Choice

Why might an expansion in government spending increase the severity of the coordination problem during a recession?

• A) Increases in government spending will not affect the composition of aggregate demand.
• B) Congress is unlikely to approve increases in government spending during a recession.
• C) Spending increases will be driven by political considerations and will often flow into areas where resources are already fully employed.
• D) Government spending can be counted on to flow toward high productivity projects.

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Definitions:

Win-lose strategy

A competitive approach in negotiations where one party's gain is perceived as the other's loss.

Accommodation

The act of adjusting or adapting one's actions, decisions, or opinions to accommodate or meet the needs of others.

Intangibles

Non-material factors that can influence negotiations, such as reputation, relationships, or principles.

Bargaining mix

The range of topics, issues, or objectives that parties negotiate and discuss in an attempt to reach an agreement.