The Difference Between the Official and Correct Measures of the Deficit

question 8

Multiple Choice

The difference between the official and correct measures of the deficit will be greater,

• A)the lower is government spending.
• B)the lower is the level of debt, B.
• C)the higher is inflation.
• D)none of the above

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is often deductible for the borrower for tax purposes.

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Stockholders' Equity/Total Assets

A ratio expressing the proportion of a company's assets that are financed by shareholders' equity.

Long-Term Debt/Stockholders' Equity

A financial ratio that measures a company's leverage by comparing its long-term debt to its stockholders' equity.