If Government Increases Spending and Wants to Maintain a Balanced

question 109

Multiple Choice

If government increases spending and wants to maintain a balanced budget, it should

• A) decrease taxes by an equal amount.
• B) increase taxes by an equal amount.
• C) decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier.
• D) increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier.

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Definitions:

Adjusted Cash Balance

The amount of cash a company has after taking into account adjustments for checks outstanding, deposits in transit, and other factors.

Debit Memo

A document issued by a buyer to a seller indicating the amount deducted from the money owed to the seller.

Check Fee Expense

Charges incurred by a business or individual for issuing or cashing checks, often recognized as an expense.

Bank Service Charges

Fees charged by banks for account maintenance, transactions, or other financial services.