Will it take a smaller amount of government spending to increase the level of national income if the government balances its budget or if it runs a budget deficit? Explain
It will take a smaller amount of government spending to achieve this goal if the government runs a budget
deficit. If it wants to balance the budget, it must match its expenditures with tax increases, since the
balanced budget multiplier equals 1 . If it is willing to run a budget deficit, then it can raise spending by a
smaller amount, since the effect of the extra government spending will not be offset (or will be only
partially offset) by an increase in taxes.
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The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus
A) increases; increases B) decreases; decreases C) increases; decreases D) decreases; increases
A saver can eliminate ________ risk through ________.
A. systemic; diversification B. systemic; asset valuation C. idiosyncratic; asset valuation D. idiosyncratic; diversification