Consider the Government's Budget Deficit Function

question 124

Multiple Choice

Consider the government's budget deficit function.If the economy goes into a recession,a government budget deficit is most likely to

• A)increase,because government expenditures and tax revenues will both rise.
• B)increase,because government expenditures will rise and tax revenues will decline.
• C)remain unchanged,although there will be a primary budget surplus.
• D)remain unchanged,because changes in government expenditures and tax revenues will balance each other out.
• E)decrease,because government expenditures will decrease and tax revenues will rise.

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Effective Interest Method

The effective interest method is a finance and accounting technique used to allocate loan or bond interest expense over the relevant period based on the loan's book value.

Journal Entry

A record in accounting that represents a transaction and shows the accounts affected and the amounts.

Sale

A transaction between two parties where the buyer receives goods, services, or assets in exchange for money or other forms of compensation.