Methods of Financing Government Spending Are Described by an Expression

question 60

Multiple Choice

Methods of financing government spending are described by an expression called the government budget constraint,which states the following

• A)the government budget deficit must equal the sum of the change in the monetary base and the change in government bonds held by the public.
• B)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the public.
• C)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the Fed.
• D)the government budget deficit must equal the difference between the change in the monetary base and the change in government bonds held by the Treasury.

---

Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more useful tool for performance evaluation.

Variable Costs

Costs that vary directly with the level of production or business activity. Examples include raw materials, packaging, and direct labor.

Fixed Costs

Fixed Costs are business expenses that remain constant regardless of the volume of goods or services produced, such as rent, salaries, and loan payments.

Favorable Volume Variance

A metric that indicates a company has produced or sold more than initially anticipated, leading to increased profitability.