Whether or not deficits create a burden depends on how and why the government incurred the deficits in the first place. Explain.
What will be an ideal response?
If the government runs deficits to fight recessions, more investment may be crowded in by rising output than is crowded out by rising interest rates. Deficits contracted to carry on wars certainly impair the future capital stock, although they may not be considered a burden for noneconomic reasons. Because these two cases account for most of the debt the U.S. government contracted until the mid-1980s, that debt cannot reasonably be considered a serious burden. However, some of the deficits since 1984 are more worrisome on this score.
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The table above gives the production possibilities frontier for two countries, Anaconda and Bear. The opportunity cost of moving from production point B to production point C for Anaconda equals ________ and for Bear equals ________
A) 50 pairs of shoes; 100 pairs of shoes B) 100 pairs of shoes; 200 pairs of shoes C) 1 ton of corn; 1 ton of corn D) 550 pairs of shoes; 700 pairs of shoes E) 650 pairs of shoes; 900 pairs of shoes
The most dramatic and rapid increases and decreases in exchange rates occur in the
a. very short run b. short run c. long run d. very long run e. triangular arbitrage market
A poll tax is
a. the same as a head tax and is regressive b. the same as a head tax and is proportional c. the same as an excise tax and is progressive d. the same as a property tax and is regressive e. a tax on voting
If average variable cost is falling, we know that:
a. marginal cost is falling. b. marginal cost is less than average variable cost. c. marginal cost is greater than average variable cost. d. marginal cost is rising.