Suppose the economy is in a recessionary gap. If government expenditures are currently $1.4 trillion and tax revenues are currently $1 trillion, the (total) budget deficit is _____________. Assume that economists estimate that if the economy were operating at full employment, government expenditures would be $1.2 trillion and tax revenues would be $1.1 trillion. The structural deficit is
_________________ and the cyclical deficit is _______________.
A) $2.4 trillion; $2.2 trillion; $200 billion
B) $400 billion; $300 billion; $100 billion
C) $400 billion; $100 billion; $300 billion
D) $300 billion; $100 billion; $400 billion
C
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Assume that there is a $20 billion increase in government purchases. If MPC = 0.8, the sum of the indirect effect on aggregate demand through induced additional consumption purchases is equal to: a. $16 billion
b. $20 billion. c. $80 billion. d. $100 billion.
The GDP can overstate the economy because ___________.
a. it excludes self-production, increased leisure time, and improved health. b. it includes self-production, increased leisure time, and improved health. c. it excludes harm caused by pollution, crime, and income inequality. d. it includes harm caused by pollution, crime, and income inequality.
The expression "There's no such thing as a free lunch" means
a. if one person gains, someone else must lose. b. each person must pay for exactly what he or she receives. c. the use of resources to produce a good has an opportunity cost because of scarcity. d. you cannot have a free lunch at the expense of someone else.
How do investment in technology and investment in capital differ?
A. They have different effects on output because of the positive externalities associated with investments in technology. B. They have different effects on output because of the positive externalities associated with investments in capital. C. They have similar effects on output so they have no important differences from an economic point of view. D. They have the same effects on output but investments in technology are much more closely tied to the level of saving than investments in capital.