An Increase in Government Purchases Will Increase Aggregate Demand Because

question 45

Multiple Choice

An increase in government purchases will increase aggregate demand because

• A)government expenditures are a component of aggregate demand.
• B)consumption expenditures are a component of aggregate demand.
• C)the decline in the price level will increase demand.
• D)the decline in the interest rate will increase demand.

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Definitions:

Average Total Cost

The total cost of production divided by the total quantity produced.

Marginal Cost

Marginal cost is the cost incurred by producing one additional unit of a product, highlighting the concept of incremental spending in production.

Average Total Cost

The per unit cost of production, calculated by dividing the total costs by the quantity of output produced.

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the total output, indicating the cost of producing one more unit.