If the Economy Is Currently Operating on a Point on the Production

question 29

Multiple Choice

If the economy is currently operating on a point on the production possibility curve for government goods and services versus private goods and services,

• A)an annual increase in government goods and services can be obtained without any sacrifice of annual private goods and services.
• B)it will be impossible to increase annual output of government goods and services.
• C)a decrease in the annual output of government goods and services will have no effect on the annual output of private goods and services.
• D)a decrease in the annual output of government goods and services will allow an increase in annual output of private goods and services.

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Definitions:

Contingent Liability

A potential financial obligation that may arise depending on the outcome of a future event.

Contingent Liabilities

Liabilities that may arise from past transactions if certain events occur in the future.

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is a non-operating expense shown on the income statement.

360-Day Year

A financial convention that simplifies interest calculations by assuming a year has 360 days.