Fiscal Policy Can Offset a Positive Shock to Aggregate Demand

question 80

Multiple Choice

Fiscal policy can offset a positive shock to aggregate demand by raising:

• A) the discount rate.
• B) the growth rate of the money supply.
• C) taxes.
• D) government spending.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a product, essential in economic theory for determining the optimal production level.

Incremental Cost

The additional cost associated with producing one more unit of output.

Accounting Break-even

The point at which a company's revenues exactly cover its expenses, excluding interest and taxes, leading to a net income of zero.

Operating Cash Flow

Operating Cash Flow is the cash generated from a company's regular business operations, indicating its ability to generate sufficient positive cash flow to maintain and grow its operations.