The Case When an Increase in Government Spending Isn't Large

question 123

Multiple Choice

The case when an increase in government spending isn't large enough to significantly increase aggregate demand is called:

• A) crowding out.
• B) a drop in the bucket.
• C) a matter of timing.
• D) a real shock.

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Definitions:

Accounting Profits

The sales revenues minus the expenses of a firm over a designated time period, usually one year. Accounting profits typically make allowances for changes in the firm’s inventories and depreciation of its assets. No allowance is made, however, for the opportunity cost of the equity capital of the firm’s owners, or other implicit costs.

Zero

Zero is a numerical value representing the absence of any quantity or magnitude; it plays a central role in mathematics and economics.

Corporate Form

A legal structure for a business, recognized by law as separate from its owners, with its own rights, privileges, and liabilities.

Business Revenues

The income generated from the sale of goods and services before any costs or expenses are deducted.