In a Two-Period SOE Model with Production, an Increase in Domestic

question 22

Multiple Choice

In a two-period SOE model with production, an increase in domestic government spending

• A)increases domestic output and increases the current account surplus.
• B)increases domestic output with no change in the current account surplus.
• C)increases domestic output and decreases the current account surplus.
• D)decreases domestic output and increases the current account surplus.
• E)decreases domestic output and decreases the current account surplus.

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Definitions:

Net Credit Sales

Sales made on credit minus any returns or allowances.

Accounts Receivable

The money owed to a business by its customers for goods or services delivered but not yet paid for.

Fair Value Measurement

This is the estimation of the price at which an asset or liability could be exchanged in a current transaction between willing parties, other than in a liquidation sale.

Financial Instruments

Contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.