One problem is that in order to spend more,
What will be an ideal response?
the government has to raise taxes, borrow, or "print money." (Issues of how government finances its expenditures are discussed later in this chapter and in subsequent ones.) Raising taxes tends to counteract the expansionary effects of increased spending. Borrowing money creates deficits and raises long-term government debt that, as we will see, may or may not be a problem (these issues are discussed in depth in Chapter 16).
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Suppose the Herfindahl-Hirschman Index (HHI) in the market for chocolate is 3,200. Two companies want to merge. The FTC definitely will challenge the merger if it increases the HHI by more than
A) 150 points. B) 100 points. C) 40 points. D) 200 points.
A . What kind of market failure is associated with goods that have negative externalities? b. How can the government intervene in free markets to correct the market failure associated with negative externalities?
Explain the difference between inferior and normal goods. As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?
Which of the following helped the U.S. economy recover following the recession of 2001?
a. The U.S. government increased spending to fight the war on terror. b. A series of corporate scandals decreased consumer confidence. c. The U.S. government increased interest rates to boost saving. d. Consumers rapidly increased their purchases and increased aggregate demand.