Suppose That the Economy Is in Equilibrium with the Government

question 39

Multiple Choice

Suppose that the economy is in equilibrium with the government budget is in deficit and with saving is less than investment.According to the circular flow model,

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

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Definitions:

Inventory Increase

An rise in the quantity or value of goods held by a company for the purpose of sale in the normal course of business.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly involved in creating the good.

Accounts Payable Decrease

A reduction in the amount a company owes to its suppliers or vendors, indicating payments have been made.

Direct Method

A approach to cash flow statement preparation where actual cash receipts and payments are reported, instead of adjusting net income.