If the Federal Budget Is Initially Balanced and Government Expenditures

question 83

Multiple Choice

If the federal budget is initially balanced and government expenditures remain constant, then a
Decrease in GDP will

• A) decrease tax revenues and create a budget surplus.
• B) increase tax revenues and create a budget surplus.
• C) decrease tax revenues and create a budget deficit.
• D) increase tax revenues and create a budget deficit.

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Definitions:

Market Value

The present cost at which a product or service is available for purchase or sale in the marketplace.

Reacquired Stock

Stock that has been repurchased by the issuing company from shareholders.

Common Stock

Shares representing ownership in a corporation, giving holders voting rights and a claim on a portion of the company's profits through dividends.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often including fixed dividends.