The Basic Keynesian Model Explains How a Decrease in Planned

question 110

Multiple Choice

The basic Keynesian model explains how a decrease in planned aggregate expenditure in the short run can cause a(n) ________ as producers cut production at preset prices to meet the lower demand and actual output ________ the potential output.

• A) expansionary gap;falls below
• B) recessionary gap;falls below
• C) recessionary gap;rises above
• D) expansionary gap;rises above
• E) recessionary gap;remains equal to

---

Definitions:

S-Type Corporations

A special designation that allows profits to be passed directly to shareholders without being subjected to corporate income taxes, but with limitations on number and type of shareholders.

Double Taxation

A situation in which the same income is taxed twice; this commonly applies to corporate income taxed at both the company level and again when distributed to shareholders as dividends.

Treasurer

An officer of a company or organization responsible for managing financial risks, investments, and treasury operations.

Expected Profit

The forecasted gain or loss from a business venture or investment, calculated by multiplying the potential outcomes by their probabilities.