To Shift the Aggregate Demand Curve Inward and Thereby Reduce

question 55

Multiple Choice

To shift the aggregate demand curve inward and thereby reduce an expansionary gap,the government could

• A)increase taxes.
• B)increase government spending.
• C)decrease government spending.
• D)increase Social Security benefits.

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Definitions:

Inelastic Demand

The condition when the quantity demanded of a product changes very little in response to changes in its price.

Profit-Maximizing

The approach by which an enterprise figures out the optimal pricing and production levels for the highest profit return.

Marginal Revenue

The supplementary income resulting from the sale of one more good or service unit.

Price-Searcher Firm

A company that operates in a market with differentiated products and has some control over the price of its product because it faces a downward-sloping demand curve.