Showing the government's budget deficit as a percentage of nominal GDP is a simple way to correct for the effects of both inflation and the ability of the economy to handle the deficit.
What will be an ideal response?
The larger the economy—as measured by GDP—the easier it is to manage a given deficit, since both the fiscal and budgetary impacts of the deficit will be relatively smaller compared to the size of the economy. A bigger economy means that people will have higher incomes and a larger flow of savings is likely to be available to purchase more government bonds, making it easier for the government to borrow
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Which of the following always decreases when output increases?
A) total fixed cost B) marginal cost C) average variable cost D) average fixed cost E) total cost
If Brazil can produce 5 shirts or 4 pounds of beef in a day, and Uruguay can produce 10 shirts or 2 pounds of beef in a day, then Brazil has a comparative advantage in the production of beef
a. True b. False Indicate whether the statement is true or false
The Paris First National Bank now has $1,000 in demand deposits. By making an $800 loan to Matt Taylor, an aspiring entrepreneur, the bank now has
a. $0 in demand deposits b. $200 in demand deposits c. $800 in demand deposits d. $1,000 in demand deposits e. $1,800 in demand deposits
Which of the following examples would enhance the effectiveness of the Fed’s monetary policy?
a. The Fed wants an expansionary policy; the fiscal policy makers want to raise interest rates. b. The Fed wants a contractionary policy; the fiscal policy makers want to increase exports c. The Fed and fiscal policy makers advocate different ways to deal with a recession. d. The Fed and fiscal policy makers both prioritize curbing inflation.