If the Government Increases Spending to Move the Economy Closer

question 16

Multiple Choice

If the government increases spending to move the economy closer to full employment,the government is most likely trying to

• A)close a contractionary gap by increasing aggregate demand.
• B)close a contractionary gap by raising the price level.
• C)close an expansionary gap by increasing aggregate demand.
• D)close an expansionary gap by increasing aggregate supply.

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Definitions:

Operating Assets

Assets used in the day-to-day operations of a business, contributing to the generation of revenue.

Turnover

A financial metric indicating the rate at which inventory is sold or the rate at which employees leave and are replaced in a business.

Net Operating Income

The profit a company generates from its operations, excluding taxes and interest, calculated as revenues minus expenses.

Operating Assets

Assets used by a business in its day-to-day operations to generate revenue, excluding investments and non-essential assets.