Contractionary Fiscal Policy to Prevent Real GDP from Rising Above

question 302

Multiple Choice

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

• A)higher; higher
• B)higher; lower
• C)lower; higher
• D)lower; lower

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Definitions:

Useful Life

The estimated period of time over which a tangible asset is expected to be useful for the purposes of the business.

Depreciable Cost

The original cost of a fixed asset minus its estimated salvage value, representing the amount subject to depreciation over the asset's useful life.

Straight-Line Depreciation

A procedure for allocating the price of a physical asset over its effective life in identical annual installments.

Useful Life

The estimated time period that an asset is expected to be usable for its intended purpose, affecting its depreciation calculation.