In a Certain Year the Aggregate Demand at the Existing

question 227

Multiple Choice

In a certain year the aggregate demand at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases.Full-employment GDP is $200 billion.To obtain full employment under these conditions the government should:

• A)encourage personal saving by increasing the interest rate on government bonds.
• B)decrease government expenditures.
• C)reduce tax rates and increase government spending.
• D)discourage private investment by increasing corporate income taxes.

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Definitions:

Discount Amortization

The process of gradually reducing the discount on bonds payable or notes payable over the life of the debt.

Theoretical Justification

The process of providing logical reasoning and evidence to support a theory or proposition.

Book Value Account

The value of an asset as recorded on the balance sheet, calculated as the cost of the asset minus depreciation or amortization.

Carrying Amount

The recorded book value of an asset or liability in the financial statements, after accounting for depreciation, amortization, and impairment.