Which of the Following Is Likely to Occur If the Government

question 63

Multiple Choice

Which of the following is likely to occur if the government of an economy tries to reduce its structural deficit?

• A) An increase in government spending.
• B) A cut in taxes.
• C) A fall in company profits.
• D) A rise in cyclical deficit.

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Definitions:

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that banks must hold against deposits, influencing the bank's ability to lend.

Money Supply

The total amount of monetary assets available in an economy at any specific time, including cash, bank deposits, and other liquid assets.

Deposit Expansion Multiplier

A ratio that explains the total increase in deposits within the banking system generated from an initial deposit, based on the reserve requirement ratio.

Open Market Securities

Financial instruments such as bonds or stocks that are traded freely on the open market and can be bought and sold by investors.