The federal budget exhibited a $128.7 billion surplus in 2001 but moved to a deficit of $157.8 billion in 2002
Some argued the deficit was opened up because of the Bush 2001 tax cuts, but others argued that the deficit grew because of the recession suffered in 2001. Evaluate the validity of the second argument.
Recessions increase the federal budget deficit because of automatic stabilizers in the economy. When GDP declines because of a recession, incomes and profits decline, causing tax revenues to decline. This will lower a budget surplus or increase a budget deficit. Falling GDP usually means rising unemployment, which increases government expenditures on unemployment insurance and other transfer programs. Increased government expenditures also lower a surplus or increase a deficit. Therefore, not all of the increase in the deficit was due to discretionary fiscal policy. Part of the increase in the deficit was a consequence of automatic stabilizers in the economy.
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Answer the next question based on the following data. All figures are in billions of dollars.Gross investment$18National income100Net exports2Personal income85Personal consumption expenditures70Saving5Government purchases20Net domestic product105Statistical discrepancy0The gross domestic product for the above economy is ________.
A. $107 B. $95 C. $110 D. $100
If two commodities are perfect complements, the indifference curve is a straight line
a. True b. False Indicate whether the statement is true or false
Suppose a firm has a weekly cost function of C(Q) = 8Q + (Q2/100) and a marginal cost function of MC = 8 + (Q/50). What is the efficient scale of production, and what is the minimum average cost?
A. Qe = 0; AC = $0 B. Qe = 0; AC = $8 C. Qe = 8; AC = $8 D. Qe = 8; AC = $64.64
Since 1950, the average length of a recession in the United States has been
A) such that recessions barely exist. B) less than a year. C) between 1 and 2 years. D) greater than 2 years.