Suppose two economies, the United States and Saudi Arabia, each have a GDP of $1,000 . A U.S. war effort involves the purchase of $100 of Saudi oil, which is financed by selling $100 worth of U.S. government bonds to Saudi Arabia. In subsequent years, GDP remains at $1,000 for each country and the United States imposes a $10 tax to make its debt payments to the Saudis. Now while the United States
is still debt obligated,
a. U.S. consumption is $1,000 and Saudi consumption is $1,000
b. U.S. consumption is $990 and Saudi consumption is $990
c. U.S. consumption is $1,010 and Saudi consumption is $990
d. U.S. consumption is $1,000 and Saudi consumption is $1,010
e. U.S. consumption is $990 and Saudi consumption is $1,010
E
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The concept of opportunity cost exists because
A. the value of services is hard to determine. B. shortages occur. C. goods have different prices. D. resources are scarce.
An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:
A. net export effect. B. wealth effect. C. real-balances effect. D. multiplier effect.
Indifference curves cannot ever be concave for two goods
Indicate whether the statement is true or false
An economic benefit of capital outflows is that they
A. reduce domestic saving. B. increase domestic investment. C. reduce domestic unemployment. D. create future income payment inflows.