How Will an Increase in the Government Budget Surplus as a Result

question 216

Multiple Choice

How will an increase in the government budget surplus as a result of lower government spending (with no change in net taxes) affect private saving in the economy?

• A)Private saving will increase by the amount of increase in the budget surplus.
• B)Private saving will decrease by the amount of increase in the budget surplus.
• C)Private saving will decrease by less than the amount of increase in the budget surplus.
• D)Private saving will be unaffected by the increase in the budget surplus.

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Definitions:

Statement of Financial Position

Another term for the balance sheet, emphasizing its role in showing the financial status of an entity at a point in time.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.

Order of Liquidity

The arrangement of assets on a balance sheet in order of the time it would typically take to convert them into cash.

IFRS

International Financial Reporting Standards, a set of accounting principles that establish how transactions and other accounting events should be reported in financial statements on a global scale.