Suppose There Is an Increase in Government Spending

question 71

Multiple Choice

Suppose there is an increase in government spending.To stabilize output,the Federal Reserve would

• A)increase government spending.
• B)increase the money supply.
• C)decrease government spending.
• D)decrease the money supply.

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Definitions:

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in zero net income or loss.

Variable Costs

Expenses that change in proportion to the activity or volume of production or sales, such as raw materials and direct labor.

Break-even Point

The point at which total revenues equal total expenses, indicating that a business is neither making a profit nor incurring a loss.

Variable Costs

Expenses that change in proportion to the activity of a business, such as material or labor costs related to production levels.