Which of the Following Is True Regarding Financial Reporting of Governmental

question 125

Multiple Choice

Which of the following is true regarding financial reporting of governmental funds?

• A) Governmental funds include the General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.
• B) The Fund Balance of governmental funds reports fund balance as reserved and unreserved.
• C) Both of the above.
• D) Neither of the above.

Understand the concepts of neutral and nonneutral taxes and their implications on economic decisions.

Grasp the principle of second best and how it applies to taxation policies.

Recognize the influence of tax elasticity on tax distortion and excess burden.

Identify the characteristics of an optimal taxation system.

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Definitions:

Open-market Operations

The buying and selling of government securities by a central bank to control the money supply and interest rates in the economy.

Friedman Rule

A monetary policy rule proposed by economist Milton Friedman, suggesting that the optimal nominal interest rate is zero to eliminate the opportunity cost of holding money.

Deflation

A decrease in the general price level of goods and services, often indicating an economic slowdown.

Inflation

The velocity at which the aggregate price level for goods and services elevates, thereby reducing purchasing capability.