Consider a Closed-Economy AD/AS Model

question 87

Multiple Choice

Consider a closed-economy AD/AS model.If an increase in the government's budget deficit drives up market interest rates,

• A)credit will become less expensive.
• B)nothing - government borrowing cannot push up interest rates.
• C)private expenditure will likely increase.
• D)some private investment expenditure will probably be crowded out.
• E)the money supply will increase.

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Definitions:

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

Accounts Receivable

Money owed to a company by its customers or clients for goods or services provided on credit.

Revenues

The total income generated from normal business operations, including sales of goods or services before any expenses are deducted.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.