If the Price Level Is Fixed, Then a Decrease in Government

question 43

Multiple Choice

If the price level is fixed, then a decrease in government spending will lead to

• A) a larger decrease in nominal GDP than in real GDP.
• B) a smaller decrease in nominal GDP than in real GDP.
• C) no decrease in either nominal GDP or real GDP.
• D) a decrease in nominal GDP by the same amount as a decrease in real GDP.

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Definitions:

Net Assets

The difference between an entity's total assets and total liabilities, representing the owners' equity in a company.

Year-end Adjustment

Adjustments made to financial statements at the close of a fiscal year to account for all financial activities and ensure accuracy in reporting.

Market Value

The current price at which an asset or service can be bought or sold, determined by the supply and demand dynamics in the open market.

Common Stock

Shares of ownership in a corporation that entitle the shareholder to vote on corporate matters and receive dividends, subject to the company's profitability.