When Spending by the Federal Government Exceeds Net Taxes

question 115

Multiple Choice

When spending by the federal government exceeds net taxes,

• A)the price level tends to rise
• B)the money supply must fall
• C)the aggregate demand curve shifts leftward
• D)aggregate supply moves leftward
• E)there is a federal budget surplus

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Definitions:

Interest Rate on Savings

The percentage yield paid by financial institutions to deposit account holders on the balances in their savings accounts.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one product for another.

Income Effect

Economic principle that describes how a change in an individual's income affects their purchasing behavior.

Interest Rate

The percentage charged on a loan or paid on savings over a certain period of time, essentially the cost of borrowing money or the reward for saving.