In the Basic Keynesian Model, a Decrease in Government Purchases

question 119

Multiple Choice

In the basic Keynesian model, a decrease in government purchases:

• A)reduces short-run equilibrium output.
• B)increases short-run equilibrium output.
• C)reduces potential output.
• D)increases potential output.

Understand the role of utilitarian arguments in shaping public policy towards income redistribution.

Grasp the principle and implications of different types of income (permanent, life-cycle, and transitory).

Understand the concept of transitory vs. permanent income and their impacts on spending decisions.

Recognize the effects of economic fluctuations on income and standard of living.

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Definitions:

Credit Risk

The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

Adjusting Journal Entries

Entries made in account books at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

Ledger Accounts

Register that contains a record of all financial transactions categorized by account types within an organization's financial statements.

AASB 12/IFRS 12

An accounting standard that requires disclosures of interests in other entities, including subsidiaries, joint arrangements, associates, and unconsolidated structured entities.