A Disadvantage of Functional Finance Is That It

question 43

Multiple Choice

A disadvantage of functional finance is that it:

• A)does not focus on producing the potential level of output in an economy.
• B)increases the level of unemployment during recessions.
• C)allows chronic deficits that magnify into national debt,allowing it to reach an alarming level.
• D)requires that the budget is balanced even during times of war.
• E)magnifies fluctuations in the business cycle.

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Definitions:

Breakeven Price

the price level at which total costs equal total revenue, indicating no profit or loss for the business.

Price Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in its price.

Revenue

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

Firm Increases Price

A strategic decision by a company to raise the selling prices of its products or services, possibly due to increased costs or in response to high demand.