If deficit spending does not contribute to public investment and crowds out private investment, then
A. Future productive capacity will be enhanced.
B. The current generation will bear the total burden of the debt.
C. The opportunity cost of the debt will be minimized.
D. The rate of economic growth will decline, ceteris paribus.
Answer: D
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If the economy is currently in equilibrium at a level of GDP that is above potential GDP, which of the following would move the economy back to potential GDP?
A) a decrease in interest rates B) a decrease in wealth C) a decrease in the value of the dollar relative to other currencies D) an increase in business confidence
The domestic currency price of a representative domestic expenditure basket is
A) P, the domestic price level. B) E, the nominal exchange rate. C) P times E, the domestic price level times the domestic price level. D) P , the foreign price level. E) P times E, the foreign price level times the nominal exchange rate.
When a positive externality is present in a market, total surplus is:
A. higher when buyers receive a Pigouvian subsidy for the externality. B. lower when buyers receive a Pigouvian subsidy for the externality. C. higher when buyers only consider private benefits. D. Any of these statements could be true.
If the price of a soda is $0.50, and the marginal utility of the first soda consumed is valued at $2, then the consumer surplus of that first soda is
a. $0.50 b. $1.50 c. $2.00 d. $2.50 e. $4.00