Which of the Following Best Describes the Notion of a "Political

question 210

Multiple Choice

Which of the following best describes the notion of a "political business cycle"?

• A)Politicians are more willing to cut taxes and increase government spending than they are to do the reverse.
• B)Fiscal policy will result in alternating budget deficits and surpluses.
• C)Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.
• D)Despite good intentions, various timing lags will cause fiscal policy to reinforce the business cycle.

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Definitions:

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee, recognizing the proportionate share of the investee's net income or loss.

Variable Interest Enterprise

An entity in which an investor holds a controlling interest that is not based on a majority of voting rights.

Consolidated Financial Statements

Financial statements that combine the financial information of a parent company with its subsidiaries into one comprehensive document.

Recognizes Gain or Loss

Refers to the process of recording in the financial statements the income or expense resulting from a transaction or event.