The Downward- Sloping Line in the Diagram Below Shows the Combinations

question 56

Multiple Choice

The downward- sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
FIGURE 1- 6
-Refer to Figure 1- 6.Suppose the government's current spending is shown by point D.In this case,

• A)the government should spend its total budget so as to get to point B,since more health spending and more education spending are both clearly desirable.
• B)the prices of education and health care have increased beyond the government's ability to pay.
• C)more education expenditures can be achieved only by sacrificing some health expenditures.
• D)the government is not spending its total budget.
• E)more health expenditures can be achieved only by sacrificing some education expenditures.

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Definitions:

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Indirect Method

A method of presenting the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to arrive at cash flow from operating activities.

Net Income

The net earnings of a company once all costs and taxes are subtracted from the total income.

Indirect Method

An approach used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate cash from operating activities.