Figure 17-2 Use the Pair of Diagrams Below to Answer the Following

question 72

Multiple Choice

Figure 17-2
Use the pair of diagrams below to answer the following questions.

-Refer to Figure 17-2. If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

• A) B and 2.
• B) B and 3
• C) B and 3.
• D) None of the above is correct.

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Definitions:

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense.

Prepaid Insurance

An asset account that reflects payments made for insurance coverage periods extending into the future; it is expensed over time as the coverage period lapses.

Normal Balance

Refers to the debit or credit balance that is expected on a specific type of account based on its accounting rule.

Contra Asset

An asset account where the account balance is a negative amount that reduces the total value of assets on the balance sheet.