Assume That Policy Makers Pass a Budget That Calls for an Increase

question 35

Multiple Choice

Assume that policy makers pass a budget that calls for an increase in government spending. In an open economy, which of the following will occur as a result of this fiscal policy action?

• A) Private saving increases.
• B) Investment decreases.
• C) The current account worsens.
• D) Either A or C occurs.
• E) Either A, B, or C occurs.

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Definitions:

Revenue Accounts

Accounts that track the income earned from a company's primary operations and other activities.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Accounting Period

The span of time at the end of which a company calculates its financial performance, typically a quarter or year.

Journalized

The act of recording a transaction in an accounting journal, documenting the financial activities of a business.