If the Government Finances an Increase in Government Purchases with an Increase

question 254

Multiple Choice

If the government finances an increase in government purchases with an increase in taxes, which of the following would you not expect to see?

• A)an increase in the exchange rate
• B)a decrease in the interest rate
• C)an increase in aggregate demand
• D)a decrease in net exports
• E)a decrease in private investment

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Definitions:

Rent Expense

An account representing the cost incurred from renting premises, equipment, or other assets for business operations over a specific period.

Interest Revenue

Income earned from lending money or through investments in interest-bearing assets.

Temporary Account

An account that is used to collect balances over an accounting period and is reset to zero at the end of the period, such as revenue and expense accounts.

Advertising Expense

Costs incurred by a business to promote its products or services.