Use the Following to Answer Questions

question 157

Multiple Choice

Use the following to answer questions :
Figure: Circular-Flow Model
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in government spending, which of the following is likely to happen?

• A)an increase in the nominal GDP
• B)an increase in the real GDP
• C)an increase in the unemployment rate
• D)an increase in the inflation rate

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Definitions:

Cash Flow From Assets

The total amount of money being transferred into and out of a business, especially affecting the operational activities involving its assets.

Operating Cash Flow

Cash generated from a company's normal business operations.

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets. It indicates how much a company is investing in its current and future operations.

Dividends Per Share

The total dividends declared in a year divided by the number of outstanding shares of the company’s stock.