If the Public Expects the Incumbent Administration to Stimulate the Economy

question 17

Multiple Choice

If the public expects the incumbent administration to stimulate the economy shortly before an election:

• A)the unemployment rate will fall at the cost of higher inflation.
• B)the economy will move up the short-run Phillips curve.
• C)lower inflation will prevail, and the rate of unemployment will remain unchanged.
• D)the economy will immediately move up the long-run Phillips curve.
• E)neither inflation nor the unemployment rate will change.

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Definitions:

Depreciation Write-Off

The accounting process of allocating the cost of tangible assets over their useful lives to account for declines in value.

Weighted Average Cost

A calculation that takes into account the varying costs and quantities of resources or components, producing a composite average cost.

Earnings Before Interest

Earnings before interest is a measure of a company's profitability that calculates earnings before the expense of interest is deducted; it’s part of the calculation used for EBIT (earnings before interest and taxes).

Unlevered Cost

The cost of financing a project or investment without any debt.