If Planned Aggregate Expenditure Equals 5,000 + 0

question 61

Multiple Choice

If planned aggregate expenditure equals 5,000 + 0.55Y and potential output (Y*) equals 12,000,then this economy has a(n) __________ gap that can be closed by _________.

• A) expansionary;increasing taxes
• B) expansionary;increasing transfer payments
• C) expansionary;increasing government purchases
• D) recessionary;decreasing government purchases
• E) recessionary;decreasing taxes

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Definitions:

Future Cash Flows

Estimated future financial transactions that a company expects to receive or pay out.

Fair Value

An estimate of the price at which an asset or liability could be traded in a fair transaction between willing parties, other than in a liquidation.

Straight-Line Depreciation

A method for allocating the financial value of a tangible asset through its lifespan in even yearly payments.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset over its useful life.