If you think that the economy is entering a recession, and fear that you might lose your job, explain how your actions of lowering your consumption level might actually increase the probability that you do lose your job
This relates to the paradox of thrift. If you think your future income might fall, then you will reduce your
consumption expenditure. But, if many people react this way, the decrease in consumption expenditure
leads to a lower national income equilibrium. A lower national income level means fewer employment
opportunities. As jobs disappear, the probability that yours will be one of them increases.
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According to this Application, which of the following is NOT a strategy that the government can pursue to address the rising cost of federal retirement and health care programs?
A) increase the age at which retirement benefits begin to be paid B) promote government saving and investment to increase real GDP over time C) borrow from the public to finance the programs D) reform the health care system to encourage more competition to reduce health care expenditures
Which one of the following twentieth-century nations eliminated the problem of scarcity?
A) Socialist Cuba B) Socialist China C) Fascist Italy D) The United States of America E) None of the above.