Which of the Following Statements Is True

question 119

Multiple Choice

Which of the following statements is true?

• A)In the short run, changes in fiscal policy mainly affect potential GDP.
• B)Fiscal policy's initial impact on real GDP is permanent.
• C)Fiscal policy does not have the potential to reduce the size of economic fluctuations.
• D)Erratic changes in fiscal policy can increase economic fluctuations.
• E)Fiscal policy cannot cause erratic fluctuations in real GDP.

---

Definitions:

Accrual Of Revenue

The recognition of income by a business at the time the revenue is earned, not necessarily when cash is received.

Cash Dividend

A payment made by a company out of its profits to shareholders in the form of cash.

Indirect Method

A way of calculating cash flows from operating activities in the statement of cash flows, where net income is adjusted for changes in balance sheet items that affect cash.

Depreciation Expense

Depreciation expense is the allocated amount of the cost of a tangible or physical asset that is expensed over its useful life, reflecting wear and tear or obsolescence.