Figure 10.4 Federal Surplus or Deficit as a Percent of GDP
What will be an ideal response?
The federal deficit—as measured by
government borrowing—reached 6
percent of GDP in 1983, a year of deep
recession. The deficit was reduced
as a percent of GDP from the early
1990s until 1998, when the budget went
into surplus. From 1998 to 2001, the
government had a net surplus, meaning that some debt was being retired. After 2000, a recession combined with the Bush administration tax cuts put the budget back into deficit. The recession of 2007-9 led to even larger deficits, reaching 10% of GDP before starting to decline as the economy started a slow recovery.
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If a country moves from a point below the production possibilities curve to a point on the curve, it is experiencing
A. Increased capacity utilization. B. Long-run growth. C. Expanded capacity. D. Economic growth.
Anna enters the workforce after being unemployed for a year. How would this be shown on her consumption function?
A. Movement down the consumption function B. Shift upward of the function C. Shift downward of the function D. Movement up along the consumption function
If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then
A. it should produce where MR = MC. B. it should produce zero output. C. total revenue is greater than total costs. D. total revenue is less than total variable costs.
If a pollution tax imposed on a firm is smaller than the external cost:
A. the externality is completely internalized. B. the social production cost increases by the amount of the pollution tax. C. the pollution tax transfers the full cost borne by people outside the firm back to the firm itself. D. from society's viewpoint, the firm is producing too much.