Governments run a balanced budget when
A) their debt is interest-free. B) transfer payments equal zero.
C) revenues equal spending. D) revenues exceed spending.
C
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Refer to Figure 14.3. Suppose the economy is initially at long-run equilibrium and the Fed increases the target inflation rate, and to hit this rate, it must reduce the real interest rate. This is best represented by an initial movement from
A) point A to point B. B) point A to point D. C) point A to point C. D) point B to point C.
An economic theory: a. should be as detailed as possible in order to model the complexity of an economy
b. is an abstraction from reality. c. is only useful if it rests on realistic assumptions. d. is unrealistic and therefore of dubious usefulness in explaining what occurs in a complex economy.