Assume That a Government Has a Balanced Budget When the Economy

question 20

Multiple Choice

Assume that a government has a balanced budget when the economy is at full employment. If the economy then enters a recession, with no change in tax or spending laws, then the budget of the government is most likely to:

• A) remain balanced.
• B) be in deficit.
• C) be in surplus.
• D) be in either deficit or surplus, depending on the severity of the recession.

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Definitions:

Retrospectively Apply

The action of applying a new accounting policy to transactions, other events, and conditions as if that policy had always been applied.

Fair-Value Method

Fair-Value Method is an accounting approach where assets and liabilities are recorded at their current market value, reflecting potential changes over time.

Goodwill

Goodwill is an intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets and liabilities at the acquisition date.

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus intangible assets and liabilities.