Suppose That the Government Decreases Its Expenditures on Goods and Services

question 127

Multiple Choice

Suppose that the government decreases its expenditures on goods and services. Within the AS-AD model, the result will be ________ in real GDP and ________ in the price level.

• A) an increase; an increase
• B) an increase; a decrease
• C) a decrease; an increase
• D) a decrease; a decrease

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Definitions:

Required Rate Of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put their money into a particular security or project.

Capital Budgeting Approaches

Strategies and methodologies used by businesses to evaluate and select major investment and expenditure opportunities.

Conceptual Standpoint

A perspective or approach based on abstract ideas or theories rather than on practical applications.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity, using future cash flows adjusted to their present value.