The balanced-budget multiplier is a measure of the short-run change in aggregate output caused by equal changes in government pu
rchases and taxes. Ignoring any supply-side or long-run effects, if the government simultaneously increases both taxes and government spending by $100 billion, what is the expected short-run impact on GDP? Group of answer choices GDP does not change. GDP increases by less than $100B. GDP decreases by less than $100B. GDP increases by $100B. GDP decreases by $100B.
The Balanced Budget Multiplier is used to.measure the effect of a simultaneous increase in Government Spending and Taxes on the Economy.
While Classical Theorists believed that they cancel each other out, Keynesian Economists went about proving that this was not the case.
They showed that an increase in Government Spending had a ripple effect that was not curtailed by increasing taxes.
What they found out was that, increasing Government Spending at the same rate as taxes led to a rise in National income that was the same as the amount that Government Spending increased by.
This means that an increase in Government Spending and tax of $100 billion will lead to an increase in Income of $100 billion as well which will be translated into the GDP.
Answer: The third option (option C) is the right answer.
Explanation:
The paragraph which has the best coherence is option C. This is because in the case of the third option, it explains that the flow of ideas is constant from one sentence to another.
The first sentence serves as an introduction which talked about the reasons why duties should be divided based on each member’s expertise. The sentences moved smoothly and also logically from one sentence to another sentence. An example is the sentence that “if your company does not have a public relations executive…..”. This should logically proceed the sentence that says that communication ought to be overseen by the director of PR.
This shows that the third option possesses a consistent and logical train of thought as well.
Tests of Control are one by auditors to determine the effectiveness of the internal controls in the company in being able to detect accounting errors and anomalies.
If a company seems to have a moderate or low inherent risk the Auditors may or may not initiate Tests of Control due to this reduced risk.
If the company however, has either high or moderate or unusually high risk, the Auditors have to perform Tests of Control to determine where the company is going wrong.
