Discuss how size of government can negatively affect economic growth
First, higher taxes and/or additional borrowing will impose an increasing burden of deadweight losses on an economy, as the size of government expands. Second, as government grows relative to the market sector, diminishing returns will reduce the rate of return derived from government activity. Third, the political process is much less dynamic than the market process. Compared to the market, there is less incentive to discover and undertake productive actions (and to refrain from counterproductive activities) in the government sector. Fourth, as government grows, it invariably becomes more heavily involved in the redistribution of income and regulatory activism. In turn, these activities will encourage wasteful rent-seeking.
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The following table shows values of annual real GDP per capita over time. Use it to answer the next question.1810$1,5001860$2,1001910$3,9001960$18,0002010$43,600What was the rate of growth in real GDP per capita between 1810 and 2010?
A. 2,807% B. 2,907% C. $43,600 D. $42,100
A key assumption made when a supply schedule is constructed is that
A. the only factors that matter in determining supply are price and quantity. B. firms only want to sell a certain amount of a product. C. supply is too important to be left to the marketplace. D. only price and quantity vary, all other determinants of supply are held constant. E. demand has a positive slope.
If the SRAS curve intersects the AD curve to the left of Natural Real GDP, the economy is
A) in a recessionary gap. B) at Natural Real GDP. C) in an inflationary gap. D) at full-employment Real GDP.
During a recession, tax revenues ________ while government transfer payments ________, thereby mitigating part of the adverse effects of a recession and stabilizing the economy.
A. fall; increase B. fall; decrease C. rise; increase D. rise; decrease