When the Government Closes an Expansionary Gap with a Change

question 148

Multiple Choice

When the government closes an expansionary gap with a change in government spending,the _____ in government spending leads to _____.

• A)decrease;a decrease in both real GDP and the price level
• B)decrease;a decrease in real GDP and an increase in the price level
• C)decrease;an increase in both real GDP and the price level
• D)decrease;an increase in real GDP and a decrease in the price level
• E)increase;a decrease in both real GDP and the price level

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Definitions:

Additional Paid-in Capital

The amount of money investors pay above the par value of a stock.

Retirement of Shares

The process by which a company buys back its own shares from the marketplace, reducing the amount of outstanding shares.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities; represents ownership equity in a firm.

Par Preferred Stock

A type of preferred stock that has a specified face value (par value) which determines the dividend calculation and has priority over common stock in dividend payments and upon liquidation.