An Increase in Government Expenditures May Lead People to Expect

question 7

Multiple Choice

An increase in government expenditures may lead people to expect that in the future taxes will rise and create greater distortions. By themselves these changes in expectations lead people to

• A)raise both consumption and investment.
• B)raise consumption but reduce investment.
• C)raise investment but reduce consumption.
• D)reduce both consumption and investment.

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Definitions:

Process Cost Systems

Accounting systems used to apply costs to similar products that are mass-produced in a continuous fashion, enabling consistent unit cost calculation.

Similar Products

Goods that satisfy the same customer needs or desires and are often interchangeable in use or consumption.

Activities Performed

The actions or operations carried out by an individual or organization in pursuit of certain objectives.

Equivalent Units

A concept used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.