Explain how deficit spending could be a burden to future generations
What will be an ideal response?
Deficit spending can lead to two negative effects. First, future generations will have higher taxes to pay off the debt. Second, current consumption crowds out investment, and reduces the growth of capital goods leaving future generations with a reduced capital stock.
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When a commercial bank lends $1000 to a customer
A) M1 and M2 decline by $1000. B) M1 and M2 rise by $1000. C) M1 rises but M2 does not change. D) there is no change in M1 or M2 until the loan proceeds are spent.
Can the median voter model help explain why third parties have generally not been successful in the United States? Explain why or why not
What will be an ideal response?
Government intervention in a perfectly competitive market
A) reduces economic well-being. B) is an illustration of the "invisible hand theorem." C) increases economic well-being. D) guarantees maximized well-being.
The Ceteris paribus assumption is important when building economic models
a. True b. False Indicate whether the statement is true or false