If Real GDP Exceeded Potential Real GDP and Inflation Was

question 281

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
• E)an increase in transfers

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Definitions:

Weighted Average Cost

Reflects the average cost per unit of inventory, factoring in all costs of items purchased at various prices.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake.

Debt

A sum of money lent by one party to another, with the agreement it will be repaid later, typically with additional interest.

Financial Leverage

Taking advantage of borrowed finances to raise the possible outcomes of an investment.