Suppose That the Economy Is in Equilibrium with the Government

question 48

Multiple Choice

Suppose that the economy is in equilibrium with the government budget in deficit and with exports greater than imports.According to the circular flow model,

• A)saving must exceed investment
• B)saving must equal investment
• C)saving must be less than investment
• D)saving could be equal to or less than investment
• E)it is impossible to determine anything about saving and investment using the given information

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Definitions:

Entity Method

A valuation approach in business combination accounting that views the acquiring and target company as a single entity from the date of acquisition.

Non-Controlling Interest

The portion of equity interest in a subsidiary not attributable to the parent company, reflecting the minority shareholders' stake.

Net Identifiable Assets

The aggregate of all assets acquired from a company, minus liabilities assumed, that can be assigned a fair value during a merger or acquisition.

Upstream Sale

A transaction in which a subsidiary sells goods to its parent company, affecting intercompany transactions and profit figures.