Which of the Following Is TRUE When Measuring the Role

question 9

Multiple Choice

Which of the following is TRUE when measuring the role of the government in an economy by the amount of its government spending?

• A) The amount of government spending overstates the role of the government in the economy because it ignores the costs associated with corruption in the government.
• B) The amount of government spending understates the role of the government in an economy because of the effects of government policies on economic activity.
• C) The amount of government spending overstates the role of the government in the economy because most government actions have negative effects on free markets.
• D) Government spending is not related to the role of government in the economy because most government actions are motivated by politics.

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Definitions:

August Sales

The total sales revenue generated by a business during the month of August.

Capital Expenditures

Long-term investments made by a company in buildings, equipment, or other assets to improve or maintain its operations.

Direct Materials Purchases

Expenditures for raw materials that are directly traceable to the manufacturing of a product and are a significant part of the production process.

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the short term.