Scenario 10.1 Imagine an Economy That Does Not Have International Trade and Trade

question 48

Multiple Choice

Scenario 10.1
Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved.
-Refer to Scenario 10.1. Calculate the value of the spending multiplier for this economy.

• A) 2.86
• B) 0.286
• C) 1.54
• D) 0.154
• E) 0.35

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Definitions:

Financial Statement

Formal records of the financial activities and position of a business, person, or other entity, presenting the financial performance over a specific period.

Business Reporting

The process of providing financial and operational information about a company's performance to stakeholders and regulatory bodies.

AICPA

The American Institute of Certified Public Accountants, a national professional organization for Certified Public Accountants (CPAs) in the United States.

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The accounting rule that specifies the exact circumstances in which income is acknowledged or recorded.