Which of the Following Poses a Limit to Fiscal Policy

question 22

Multiple Choice

Which of the following poses a limit to fiscal policy?

• A) crowding out
• B) size of government expenditures
• C) timing lags
• D) Each of these answers is correct.

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Definitions:

Cash Basis Accounting

A method of accounting where transactions are recorded when cash is actually received or paid, rather than when it is earned or incurred.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Revenue Recognition

Revenue recognition is the accounting principle governing when revenue is considered earned and can be recorded.

Expense Recognition Principle

An accounting principle that expenses should be recognized and recorded at the time they are incurred, not necessarily when cash is paid.