Investment Spending Includes Spending on

question 128

Multiple Choice

Investment spending includes spending on

• A)stocks.
• B)food.
• C)changes in business inventories.
• D)transfer payments.
• E)bonds.

Comprehend how self-correction mechanisms work in adjusting an economy towards its potential output.

Differentiate between passive and active approaches to economic policy.

Identify the effects of policy stances (active and passive) on real GDP and price levels in the short and long run.

Recognize the role of wages (money and real) in the self-correction process.

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Definitions:

Federal Budget Deficit

The financial situation where the federal government's expenditures surpass its revenues within a given fiscal year.

Automatic Stabilizers

Economic mechanisms, such as progressive taxation and welfare spending, that automatically adjust to mitigate economic fluctuations without the need for explicit government action.

Transfer Payments

Payments made by governments to individuals or other government entities without receiving any goods or services in return, such as welfare benefits or subsidies.

Uncontrollable Budget Items

Government expenditures that are considered mandatory and not subject to annual review or adjustment by Congress, such as interest payments on national debt.