Which of the Following Statements Is True

question 119

Multiple Choice

Which of the following statements is true?

• A)In the short run, changes in fiscal policy mainly affect potential GDP.
• B)Fiscal policy's initial impact on real GDP is permanent.
• C)Fiscal policy does not have the potential to reduce the size of economic fluctuations.
• D)Erratic changes in fiscal policy can increase economic fluctuations.
• E)Fiscal policy cannot cause erratic fluctuations in real GDP.

---

Definitions:

Cash Burn

The rate at which a company spends its cash reserves before generating positive cash flow.

Cash Equivalents

Highly liquid investments that are readily convertible to known amounts of cash and have an original maturity of three months or less.

Monthly Cash Expenses

The total amount of money spent by an individual or business in cash over the course of a month.

Compensating Balance

A minimum balance that a borrower must maintain in a bank account as a condition for getting a loan from that bank.