In Addition to Government Purchases or Changes in Taxes, Demand

question 55

Multiple Choice

In addition to government purchases or changes in taxes, demand shocks in the economy can increase or decrease GDP, leading to a fall or rise in the trade balance. Which of the following would NOT represent a demand shock?

• A) a change in household wealth leading to a rise in consumption expenditures
• B) a rise in inflation
• C) a change in the marginal propensity to import, causing imports to rise
• D) an increase in technology, causing investment spending to rise

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Definitions:

Post-Closing Trial Balance

A summary of all accounts after closing entries are made, used to check the accuracy of closing entries and the balance of permanent accounts.

Adjusted Trial Balance

A list of all accounts and their final balances after all end-of-period adjusting entries have been made, used to prepare financial statements.

Revenue Recognition

The accounting principle that determines the specific conditions under which revenue is recognized and recorded in financial statements.

Income Taxes

Taxes levied by the government on the income of individuals or corporations.