How can an event such as the terrorist attacks of September 2001 affect consumer and business confidence and the economy?
What will be an ideal response?
Any situation that makes people feel vulnerable or scared, such as the terrorist attacks, causes a decrease in consumer and business confidence. A decrease in confidence causes individuals to spend less. This causes a decrease in aggregate demand. With less demand for goods and services in the product markets, workers are laid off, incomes decrease, and the multiplier process begins to make the economy even worse.
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Which of the following statements about the budget deficit is TRUE?
A) It is equal to the public debt. B) It is a stock variable. C) It is a flow variable. D) none of the above
Which of the following is an intermediate target?
A) M2 B) reserves C) unemployment rate D) inflation rate
Assuming that progressive taxation is desirable, a consumption tax calculated by subtracting saving from income would be preferable to a general sales-based consumption tax
a. True b. False
Economic theory
a. expresses normative values b. invents imaginative and interesting stories c. predicts the behavior of a specific economic decision maker after an economic change d. predicts the average behavior of a group of similar economic decision makers after an economic change e. uses only perfect and complete information