If Policy Makers Want to Decrease Real GDP by $100

question 173

Multiple Choice

If policy makers want to decrease real GDP by $100 billion and the marginal propensity to consume is 0.6, they should _____ government purchases of goods and services by _____ .

• A)decrease; $100 billion
• B)decrease; $60 billion
• C)decrease; $40 billion
• D)increase; $100 billion

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts to prepare the books for the next period.

Adjusting Entries

Journal entries made in accounting to update the records for expenses and revenues that have accrued but not yet been recorded.

Unadjusted Trial Balance

A listing of all the accounts and their balances from the ledger, before any adjusting entries are made for preparing financial statements.

End-of-period Spreadsheets

Summarizing documents prepared at the end of an accounting period that compile balances from ledgers for financial reporting.