Which of the Following Actions Could Be Undertaken If the Government

question 191

Multiple Choice

Which of the following actions could be undertaken if the government wants to reduce a recessionary gap?

• A) Increase taxes and reduce government spending.
• B) Reduce taxes and increase government spending.
• C) Increase taxes and increase government spending.
• D) Increase taxes more than the amount of reduction in government spending.

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Definitions:

Marginal Cost

The price of creating an additional unit of any given product or service.

Profit-Maximizing Monopoly

A monopoly that adjusts its output level to where marginal costs equal marginal revenues to achieve the highest possible profit.

Additional Unit

In economics, refers to the next item or unit of production, used in analyzing the costs and benefits of producing one more unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity produced, representing the cost per unit of output.