Without a Change in Discretionary fiScal Policy, We Would Expect

question 334

Multiple Choice

Without a change in discretionary fiscal policy, we would expect that if the economy goes into recession, then the

• A) cyclically adjusted deficit and the actual deficit would both increase.
• B) cyclically adjusted deficit and the actual deficit would both decrease.
• C) cyclically adjusted deficit would stay the same while the actual deficit would increase.
• D) cyclically adjusted deficit would increase while the actual deficit would stay the same.

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Definitions:

Indirect Method

A technique used in cash flow statements where net income is adjusted for non-cash transactions and changes in working capital to calculate net cash from operating activities.

Cash Dividend

A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Statement Of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Indirect Method

A technique used in cash flow statements where net income is adjusted for non-cash transactions and changes in working capital to arrive at cash flow from operating activities.