If Real GDP Exceeded Potential Real GDP and Inflation Was

question 12

Multiple Choice

If real GDP exceeded potential real GDP and inflation was increasing,which of the following would be an appropriate fiscal policy?

• A)a decrease in the money supply and an increase in the interest rate
• B)an increase in government spending
• C)an increase in taxes
• D)an increase in oil prices

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Definitions:

EBIT

Stands for Earnings Before Interest and Taxes, an indicator of a company's profitability excluding interest and tax expenses.

Bankruptcy Proceedings

A legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

M&M Proposition

The Modigliani-Miller Proposition, a principle in finance stating that, under certain conditions, the value of a firm is unaffected by how it is financed, regardless of whether through debt or equity.