Suppose That the Federal Budget Is Balanced When GDP Is

question 17

Multiple Choice

Suppose that the federal budget is balanced when GDP is at potential GDP.If equilibrium GDP falls below potential

• A)this will result in a current budget deficit.
• B)the cyclically adjusted budget will be balanced.
• C)government transfer payments will be rising and tax receipts will be falling.
• D)All of the above are correct.

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Definitions:

Direct Materials

Raw materials that are used directly in the manufacturing of a product and can be directly attributed to the product.

Borrowing

The act of receiving something with the intention to return it, often referring to money from a lender under agreed terms.

DFL

Usually refers to Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, as affected by changes in its capital structure.

EBIT

Earnings Before Interest and Taxes, an indicator of a company's profitability excluding interest and income tax expenses.