Suppose Government Purchases Have Decreased

question 85

Multiple Choice

Suppose government purchases have decreased. Which of the following is true?

• A)If inflation is lower in the new equilibrium, the Fed has allowed the target rate of inflation to drift up.
• B)If inflation is constant in the new equilibrium, the Fed has decreased the target rate of inflation.
• C)If inflation is lower in the new equilibrium, the Fed has allowed the target rate of inflation to drift down.
• D)If inflation is lower in the new equilibrium, there has been no change in the target rate of inflation.
• E)If inflation is constant in the new equilibrium, the Fed has increased the target rate of inflation.

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Definitions:

Fixed Assets

Physical assets with a long lifespan that serve operational purposes in a business and aren't likely to be sold or used up within a year.

Stockholders

Individuals or entities that own shares in a corporation, thus holding partial ownership of the company.

Current Assets

Refers to assets that a company expects to convert into cash within one year or one business cycle, whichever is longer.

Net Fixed Assets

The value of a company’s fixed assets minus any accumulated depreciation, representing the actual value of the company's fixed assets.