Question

A main reason the federal government may choose to spend would be the: Multiple Choice desire...

A main reason the federal government may choose to spend would be the:

Multiple Choice

  • desire to achieve full-employment GDP.

  • real interest rates increase.

  • government expected to earn a large return on its spending.

  • real interest rates decrease.

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Answer #1

Government spending is a part of aggregate expenditure. Government can change their spending according to the situation of the economy. If there is a recession in economy then government can increase their spending in order to pull out the economy from the recession and reach to the full employment level of GDP.

Similarly, in case of inflationary situation goverment can decrease its spending and reach the full employment level of GDP.

Answer: option (A).

A main reason the federal government may choose to spend would be the desire to achieve full-employment GDP.

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