Which of the Following Is an Example of an Automatic

question 115

Multiple Choice

Which of the following is an example of an automatic fiscal policy action?

• A)A decrease in the tax rate resulting from an effort to increase aggregate demand to combat a recession.
• B)An increase in unemployment benefit payments resulting from higher unemployment.
• C)An increase in the tax rate resulting from a desire to shrink the budget deficit.
• D)An increase in spending on defence goods resulting from increased tension with Indonesia.
• E)None of the above answers is correct.

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Definitions:

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous accounting period, simplifying the recording of transactions.

Liability Account

An account on a company's balance sheet that records debts or obligations the company needs to pay in the future.

Adjusting Entry

Accounting entries recorded at the close of an accounting cycle to distribute expenses and revenues to the period they truly belong to.

Consulting Services

Professional advisory services provided to businesses and organizations to improve operations, strategy, and financial performance.