If Aggregate Demand Shifts Right and the President and Congress

question 23

Multiple Choice

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output,they could

• A)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
• B)increase government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.
• C)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will raise output above its long-run level.
• D)decrease government expenditures.If by the time policy has been implemented the economy has moved back to long-run equilibrium,then this policy will reduce output to below its long-run level.

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Definitions:

Ending Inventory Cost

The total value of all the goods a company has in stock at the end of a financial period, calculated using one of several accounting methods.

Physical Inventory

A process of counting the actual inventory on hand at a particular point in time.

Units Available

The total quantity of goods a company has ready for sale or production usage at any given time.

Retail Method

An accounting method to estimate inventory value by applying a consistent markup to the cost of merchandise, used often in the retail industry.