Contractionary Fiscal Policy Is Enacted When the Overall Effect of Decisions

question 4

Multiple Choice

Contractionary fiscal policy is enacted when the overall effect of decisions about taxation and spending is to:

• A) reduce aggregate demand.
• B) increase aggregate demand.
• C) reduce aggregate supply.
• D) increase aggregate supply.

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Definitions:

Perpetual Inventory Account

A method of recording inventory that updates inventory records in real-time with every transaction, sale, or purchase.

FIFO

An inventory valuation method (First In, First Out) where the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced or purchased items are recorded as sold first.

Perpetual FIFO Method

An inventory costing method where goods are assumed to be sold in the order they are acquired, continuously updated to reflect inventory levels and cost of goods sold.