An Increase in Government Expenditure Will NOT Crowd Out Private

question 49

Multiple Choice

An increase in government expenditure will NOT crowd out private spending when:

• A) the economy is at full employment.
• B) the level of unemployment is high.
• C) interest rates are very low.
• D) inflation is very high.

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Definitions:

Direct Method

A way to prepare the cash flow statement, where operating cash receipts and payments are listed directly to calculate net cash from operating activities.

Cash Payments

Financial transactions that involve the transfer of cash from one entity to another.

Income Taxes Payable

The amount of income taxes a company owes to governmental entities but has not yet paid.

Operating Activities

Operating Activities involve the cash flows that are generated from the primary business activities of a company, such as selling products or services.