Which of the Following Is Correct with Regard to Budget

question 156

Multiple Choice

Which of the following is correct with regard to budget deficits and the national debt?

• A) Canada's national debt is the amount of money Canada owes the United States.
• B) A budget deficit occurs when income tax revenue is less than interest payments on the national debt.
• C) A budget deficit occurs when government expenditures in a given year exceed government revenues.
• D) There is no relationship between annual budget deficits and the total national debt.
• E) The national debt is more important than annual budget deficits.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salary, or insurance, providing stability to a company's expense structure.

Margin of Safety

The difference between actual or projected sales and the break-even point, often expressed as a percentage.

Contribution Margin Ratio

A financial metric showing the percentage of revenue that exceeds total variable costs, indicating how much revenue contributes to fixed costs and profit.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in no profit or loss.