Which of the following contributed to the turn-around in the U.S. government budget from a surplus in the early 2000s to record deficits by the end of the decade?
A. An increase in tax revenues because of a recession.
B. An increase in business saving.
C. An increase in government purchases on homeland security and wars.
D. An increase in household saving.
Answer: C
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According to the Keynesian model, the short-run aggregate supply (SRAS) curve is horizontal when
A) prices react to an aggregate demand shock but real Gross Domestic Product (GDP) does not. B) there are no unemployed resources and wages do not change when prices change. C) there are unemployed resources and prices do not fall when aggregate demand falls. D) real Gross Domestic Product (GDP) is at full capacity but prices are not flexible.
All of the following statements regarding the marginal revenue product (MRP) curve and the demand for labor are true EXCEPT
A) an individual firm's demand for labor is its MRP curve. B) under conditions of perfect competition, MRP equals marginal physical product multiplied by the product's price. C) an increase in the market demand for a given product decreases the product's price. D) the demand for labor is a derived demand.
Suppose the government imposes a $2 per-unit tax on an item whose production creates a negative externality. Suppose the $2 is exactly the value of the external cost. If the government uses the tax revenue to clean up pollution created by this production,
a. an optimal allocation of resources has been achieved b. the market's equilibrium price is an efficient one c. no externalities exist d. there is no market failure e. it is clear that obligatory controls have worked
For most goods and services, an increase in income will cause the demand curve to shift to the left.
Answer the following statement true (T) or false (F)