If an Inflationary Boom Exists, the Appropriate Fiscal Policy Is

question 93

Multiple Choice

If an inflationary boom exists, the appropriate fiscal policy is to:

• A) increase the budget deficit.
• B) increase government spending and hold taxes constant.
• C) decrease government spending and/or raise taxes.
• D) hold government spending constant and decrease taxes.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance.

Marginal Costs

The additional cost incurred from producing one additional unit of a product or service.

Break-even Quantity

The number of units that need to be sold for a business to cover its production costs, resulting in zero profit or loss.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent or salaries, remaining constant regardless of business activity.