Which of the following correctly represents the budget deficit?
a. Tax revenue - government purchases
b. Tax revenue - government outlays
c. Government purchases - tax revenue
d. Government outlays - tax revenue
e. Government outlays - tax revenue - transfer payments
D
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Refer to Figure 13.2. Assume the economy is initially in equilibrium with real GDP equal to potential GDP
Other things equal, if the economy enters a recession and the government underestimates the severity of the recession when implementing fiscal policy, the output gap will ________ and the rate of inflation will ________ than if the government had correctly estimated the recession's severity. A) decrease less; decrease less B) decrease more; decrease more C) decrease more; decrease less D) not change; not change
Which of the following would be considered a contingent contract?
A) a piece rate contract B) a profit-sharing contract C) a contact with a bonus D) All of the above.
Assume that labor and capital are complements in production and that the wage declines. Which of the following statements best describes the adjustment in the use of labor?
A) Adjustments in labor use are not influenced by adjustments in capital use. B) The MRPL curve shifts downward in this case. C) More labor is used both because of the reduced wage and increased use of capital. D) Changes in labor use are indeterminate because the reduced wage and reduced use of capital have opposite influences on the use of labor.
During the Great Depression, the United States economy operated ______________ the production possibilities frontier.
Fill in the blank(s) with the appropriate word(s).