Which of the Following Are Effects of an Increase in Government

question 2

Multiple Choice

Which of the following are effects of an increase in government spending financed by a tax increase?

• A)the tax increase reduces consumption;the change in the interest rate reduces residential construction
• B)the tax increase reduces consumption;the change in the interest rate raises residential construction
• C)the tax increase raises consumption;the change in the interest rate reduces residential construction.
• D)the tax increase raises consumption;the change in the interest rate reduces residential construction

---

Definitions:

Lower Of Cost

An accounting principle requiring that the inventory is recorded at the lower of its cost or the current market value.

Net Realisable Value

The estimated selling price of goods, minus the costs of their completion and the costs needed to make the sale.

Biological Assets

Living plants or animals that are used in agricultural production or held for sale, whose value and productivity can change over time due to biological transformation.

Financial Instruments

Transactions that lead to the formation of a financial asset for one entity and, at the same time, a financial liability or an equity tool for a different entity.