Increases in Government Spending Financed Through Additional Borrowing Will Typically

question 240

Multiple Choice

Increases in government spending financed through additional borrowing will typically have the largest impact on aggregate demand when:

• A) the stock market and other private investments are booming.
• B) increased uncertainty causes a decrease in private sector investing.
• C) interest rates are high.
• D) private sector spending is high.

---

Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product.

Indirect Materials

Materials used in the production process that cannot be directly linked to a specific product, such as lubricants and cleaning supplies used on machinery.

Manufacturing Overhead

All indirect costs associated with manufacturing a product, such as utilities, rent, and salaries for employees not directly involved in production.

T-Accounts

A simplified accounting tool that represents a ledger account and is used to understand the effects of transactions on account balances.