Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?
What will be an ideal response?
The classical economists believed that each dollar saved would be invested by firms so that the leakage of saving would be exactly matched by an injection of investment spending. The interest rate would adjust to ensure that saving equaled investment.
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Suppose the price of oranges rises. As a result, the
A) supply of orange pickers increases. B) supply of orange pickers decreases. C) demand for orange pickers increases. D) demand for orange pickers decreases.
Between two countries, comparative advantage is found by comparing the:
a. relative costs of production in each country. b. absolute costs of production in each country after accounting for inflation. c. labor hours required to produce a bundle of products in each country. d. level of interest rates in each country. e. shipping and transportation costs of each country.
The Reagan tax cuts of the 1980s
a. had not impact on the budget deficit. b. decreased the budget deficit. c. increased the budget deficit. d. initially decreased the deficit but later increased it.
Which of the following is not a means-tested program?
a. Social Security b. Temporary Assistance for Needy Families c. Earned Income Tax Credit d. Supplemental Security program