A Government Budget Deficit

question 9

Multiple Choice

A government budget deficit

• A) is more inflationary when financed by higher tax rates.
• B) is generally considered undesirable in the Keynesian view of economic policy.
• C) can never occur when the structural deficit is zero.
• D) that is financed by creating new money draws funds that might otherwise have been spent on consumption and investment.
• E) could result from recession-induced decreases in tax revenues rather than from increases in government spending.

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Definitions:

Investing Section

Part of a cash flow statement that shows the cash spent on and received from investment activities, indicating how a company is allocating its resources for growth.

Statement of Cash Flows

A financial report that provides a summary of a company's cash inflows and outflows over a specific period.

Tangible Capital Assets

Physical assets owned by a business that are used in its operation and have a useful life longer than one fiscal year, such as buildings and machinery.

PSAB

stands for Public Sector Accounting Board, which sets accounting standards for public sector entities in some countries, focusing on transparency and accountability.