Suppose Initially the Federal Budget Is Balanced

question 131

Multiple Choice

Suppose initially the federal budget is balanced. The economy then enters a period of expansion. What is likely to happen to the federal budget?

• A) It will show a surplus.
• B) It will show a deficit.
• C) It will remain balanced.
• D) It will automatically stabilize.

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Definitions:

Operating Cash Flow

Measures the cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations without new financing.

Net Working Capital

The difference between a company's current assets (like cash, inventory, receivables) and its current liabilities (like payables), indicating short-term financial health and operational efficiency.

Cash Flow From Assets

The total amount of money being transferred in and out of a business, particularly from operational, investing, and financing activities.

Shareholders' Equity

The ownership interest of shareholders in a company's assets, once all liabilities have been subtracted.