Scenario 13-2

question 267

Multiple Choice

Scenario 13-2. Assume the following information for an imaginary, closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 13-2. For this economy, public saving is equal to

• A)$-10,000 and the government is running a budget deficit of $10,000.
• B)$-10,000 and the government is running a budget surplus of $10,000.
• C)$10,000 and the government is running a budget deficit of $10,000.
• D)$10,000 and the government is running a budget surplus of $10,000.

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Definitions:

Straight-Line Amortization

A method of systematically reducing the cost value of an intangible asset over its useful life by charging equal expense amounts to each accounting period.

Effective-Interest Method

A method of calculating the interest expense on a bond or loan by applying the constant interest rate to the outstanding balance of the debt for each period.

Bond Discount

The discrepancy between a bond's nominal value and its market price when it is traded at a price below its nominal value.

Expense Recognition Principle

An accounting guideline that dictates expenses to be recorded in the period they are incurred to generate revenue, ensuring accurate financial statements.