The government purchases component of aggregate demand includes
I. all purchases by government agencies of goods and services produced by firms.
II. direct production by government agencies themselves.
III. government expenditures on transfer payments.
A) I only
B) I and II only
C) I and III only
D) I, II, and III
Ans: B) I and II only
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One of the advantages of floating exchange rates is that:
a. consumers always know how much imported goods cost. b. businesses always know, in advance, what future exchange rates will be. c. countries are free to pursue their own macroeconomic policies without maintaining exchange rates. d. countries cannot act independently and must thus coordinate their macroeconomic policies. e. the global interest rate tends to decline to the lowest possible level.
For a country which has a relatively high rate of inflation and wants some form of pegged exchange rate, which of the following exchange-rate regimes is the best choice?
A. Adjustable peg B. Crawling peg C. Fully fixed exchange rate D. Fully convertible currency