Starting from Its Potential Output,an Economy's Government Increases Spending

question 333

Multiple Choice

Starting from its potential output,an economy's government increases spending.In the long run,this economy will produce at:

• A) an output level above its potential output.
• B) its potential output.
• C) an output level below its potential output.
• D) its potential output level at a lower aggregate price level.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the volume of goods or services produced by a business.

Net Income

The total profit of a company after operating expenses, taxes, and all other incomes and expenses have been deducted from total revenue.

Variable Costs

Costs that change in proportion with the level of production or sales volume, such as materials and labor.

Fixed Costs

Expenses that do not change with the level of production or sales in the short term, such as rent, salaries, and equipment leases.