The Effect of an Increase in Government Spending on Real

question 47

Multiple Choice

The effect of an increase in government spending on real GDP will be lesser:

• A)the smaller the crowding-out effect.
• B)the smaller the percentage of government spending financed by tax increases.
• C)the larger the government budget surplus.
• D)the more rapidly money is converted into goods.
• E)the steeper the aggregate supply curve.

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Definitions:

Common Fixed Costs

Costs that remain unchanged in total for a given time period, despite variations in activity level.

Variable Costing

An accounting method that includes only variable costs—costs that change with production level—in product costs, excluding fixed manufacturing overhead.

Absorption Costing

An accounting method that includes all direct and indirect manufacturing costs in the cost of a product.

Product Costs

Expenses directly tied to the production of goods or services, including materials, labor, and overhead costs.