Deficits are a burden on future generations if they
A. cause national saving to fall.
B. are not used for government capital formation.
C. are always a primary government deficit.
D. cause higher rates of inflation to occur.
Answer: A
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A consultant interviews the hiring manager of a small, profit-maximizing firm. The manager explains that the firm used to have 15 employees, but the most-recently-hired employee has just left the company. The firm is currently advertising to hire a worker to replace the employee who just left at the same wage rate. We can infer that
a. for the 15th employee, the wage exceeded the value of the marginal product of labor. b. for the 15th employee, the value of the marginal product of labor exceeded the wage. c. the firm is too large and should remain at 14 employees. d. the firm is no longer attempting to maximize profits.
Suppose there are two economies that are identical in every way with the following exception. Economy A has an unemployment compensation system while economy B does NOT have an unemployment compensation system. Now suppose both economies experience the same drop in planned investment. Which of the following is correct?
A. Real GDP will fall more in economy A than in economy B. B. Real GDP will fall the same in both economies. C. Real GDP will fall more in economy B than in economy A. D. The effect on the relative size of the reduction in real GDP in the two economies is ambiguous.
Total revenue will decrease when
A. the price elasticity of demand equals 1.20 and price rises. B. price and quantity change in opposite directions. C. the price elasticity of demand is negative. D. the price elasticity of demand equals 1.00 and price falls.