Suppose that the government is considering a policy to combat unemployment. If the government pays for increased spending by borrowing funds that otherwise would have been used for consumption and investment,
a. the positive effect of increased government spending is augmented by an increase in private spending.
b. the negative effect of increased government spending is offset by an increase in private spending.
c. the negative effect of increased government spending is augmented by a reduction in private spending.
d. the positive effect of increased government spending is offset by a reduction in private spending.
d. the positive effect of increased government spending is offset by a reduction in private spending.
You might also like to view...
Why does the model of perfect competition imply that firms will produce the products that households want the most?
What will be an ideal response?
How does an increase in the proportional labor income tax modify the consumer's budget constraint?
A) a parallel move up B) a parallel move down C) the slope decreases (constraint gets steeper) D) the slope increases (constraint gets flatter)
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
An agribusiness firm may undertake three alternatives: buy cane sugar and manufacture various sugars and sweets, making a profit of $12 million; buy corn and produce ethanol, making a profit of $16 million; or buy wheat and produce breads, rolls, and
pastries, making a profit of $13 million. The opportunity cost associated with these three choices is A) $4 million. B) $3 million. C) $13 million. D) $16 million.