Answered: 1) The amount the government would owe…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1) The amount the government would owe if a borrower were to default on a government-guaranteed loan is an example of:

capital budgeting.

a cyclically adjusted liability.

a contingent liability.

Ricardian equivalence.

2) Current measures of the U.S. federal government's budget deficit account for all of the following except:

government expenditures.

government revenues.

changes in government indebtedness.

changes in government capital assets.

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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