If for Every Dollar Increase in Farm Subsidies the Government

question 43

Multiple Choice

If for every dollar increase in farm subsidies the government decreased urban welfare payments by a dollar,we would expect the net effect to be

• A)an increase in the budget deficit because government spending has increased
• B)a decrease in the budget deficit because transfer payments are not included in the government's budget
• C)an increase in the budget deficit because transfer payments have increased
• D)an increase in the budget deficit because farm subsidies are transfer payments but urban welfare payments are not
• E)no change in the budget deficit

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Definitions:

Total Equity

The residual interest in the assets of an entity after deducting liabilities; essentially, it represents the ownership value in the firm.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management is using a company’s assets to create profits.

Total Debt Ratio

A financial metric that compares the total amount of a company's debt to its total assets, indicating the extent to which a company's operations are financed by debt.

Net Working Capital Turnover

A measure of how effectively a company is using its net working capital to generate sales.