A Disadvantage of Functional Finance Is That It _____

question 68

Multiple Choice

A disadvantage of functional finance is that it _____

• A) does not focus on producing the potential level of output in an economy.
• B) increases the level of unemployment during recessions.
• C) lets chronic deficits magnify into a national debt, allowing them to reach an alarming level.
• D) requires that the budget is balanced even during times of war.
• E) magnifies fluctuations in the business cycle.

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Definitions:

Cash Flows

refers to the in and out movement of cash and cash equivalents within a business.

Historical Rates

Exchange rates that were in effect at the time of a past transaction or financial statement, used for translating foreign currency transactions and balances into the reporting currency.

Foreign Operations

Business activities that are conducted in countries other than the company’s home country, often involving different currencies and regulations.

Natural Hedge

A risk management strategy that involves offsetting risk by naturally balancing opposing positions in the business.