Which of the Following Are Possible Consequences When the Government

question 5

Multiple Choice

Which of the following are possible consequences when the government reduces government purchases to address an inflationary gap?
I. increase in the price of bonds
II. increase in net exports
III. decrease in the federal budget deficit (or increase the surplus)
IV. decrease in the exchange rate

• A) I, II, III, and IV
• B) I and III only
• C) I, III, and IV only
• D) II, III, and IV only

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Definitions:

Significant Degree

A high level or extent of importance or impact that an element or factor has in a particular context.

Inter-Entity Transactions

Transactions that occur between different entities within the same group, needing to be eliminated during consolidation to avoid double counting.

Foreign Exchange Gain

A profit resulting from changes in the exchange rate between the base currency used by a company and the foreign currencies in which it transacts.

Translating

The process of converting financial statements from one currency into another, typically for consolidation purposes.