Contractionary Fiscal Policy Shifts the Aggregate Demand Curve to the _____

question 21

Multiple Choice

Contractionary fiscal policy shifts the aggregate demand curve to the _____ and is used to close a(n) _____ gap.

• A) right; inflationary
• B) right; recessionary
• C) left; inflationary
• D) left; recessionary

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Definitions:

Margin Of Safety

The difference between actual sales and the break-even point. It measures how much sales can fall before a business incurs a loss.

Variable Costs

Expenditures that adjust based on the degree of operational activity or the volume of goods manufactured.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activities.

Contribution Margin Ratio

A metric that shows what percentage of sales revenue is available to cover variable costs and contribute to fixed costs after all variable expenses have been covered.