Which of the Following Best Describes the Impact of Fiscal

question 20

Multiple Choice

Which of the following best describes the impact of fiscal policy during the Great Depression?

• A) Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand.
• B) Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget.
• C) It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II.
• D) There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.

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Definitions:

Remittance Advice

A document sent by a customer to a seller, indicating that an invoice has been paid.

Running Cash Balance

The current amount of cash available in an account, changing with each transaction.

Company Check

A check written from a company's account, representing an official payment by the company to another party.

Deposits in Transit

Funds that have been deposited by a company but have not yet been recorded by the bank.