Suppose that you are an economist working for the United States government and are asked to defend the level and growth of government spending. What information could you use to your advantage?
You could begin by noting that, while government spending has risen, government spending in the United
States as a percentage of GDP has remained relatively constant since 1970 . Second, you could point out
that the percentage of GDP devoted to government spending in the United States is comparable to that of
other OECD countries and this has been the case for at least thirty years. Finally, you could argue that
without government purchase of public goods, such as roads and defense, they would not be produced at
all.
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When there is a positive externality associated with the watering of one's lawn, the free market results in:
a. not enough lawn watering. b. too much lawn watering. c. the socially optimal level of lawn watering. d. people watering each other's lawns. e. government subsidies for lawn watering.
If the federal government were to run a budget deficit, this would:
a. increase the size of the national debt. b. reduce the size of the national debt. c. leave the size of the national debt unchanged. d. increase the national debt only if the government also expands the supply of money.
The various combinations of goods that can be produced by an economy using its available resources and technology efficiently is called
a. limits to scarcity b. opportunity cost c. limited production d. capital accumulation e. production possibilities
During a recession, we generally see
a. real GDP rising and unemployment rising b. real GDP falling and unemployment rising c. real GDP rising and inflation rising d. real GDP rising and inflation staying stable