Based on the conventional view of fiscal policy and potential GDP in the long run, explain what happens to each of the following if the government runs a budget deficit:
a. the supply of loanable funds to the private sector
b. long-term real interest rates
c. the capital stock
d. the investment rate
e. potential GDP
If the government runs a budget deficit:
a. decreases
b. increase
c. decreases
d. decreases
e. decreases
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What will be an ideal response?
When a voter chooses to remain ignorant when the opportunity costs of gathering information outweigh the benefits, it is called:
A. trigger mechanisms. B. instinct theorem. C. irrational voting. D. rational ignorance.
Which of the following items would be in GDP?
A. the value of pollution emitted from a factory B. the building that a company has used for its headquarters for a decade C. household purchasing tax advice from an accountant D. a single person cleaning their own clothes
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A. as long as this ratio remains high, the government will have no trouble repaying the debt. B. GDP is always used as a reference point in economics. C. the ability of a country to pay off its debt depends on its productive capacity. D. the ability to produce output depends on the size of the nation's debt.