Suppose the government reduces its budget deficit at the same time that energy prices rise sharply. Which of the following is most likely to happen?
a. The price level will rise, since higher energy prices increase the cost of production
b. Real GDP will fall since both events will tend to cause an economic contraction.
c. The price level will fall because the aggregate demand curve has shifted leftward.
d. Real GDP will rise as less government spending leads to more opportunities for the private sector.
e. Both the price level and real GDP will fall.
b
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Bill is an economics professor who earns $40,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his first year of barbecuing he earned total revenue of $60,000. He spent $30,000 on food and supplies
He also paid his wife $10,000 to help serve food. The normal profit for an entrepreneur running a barbecue business is $3,000. He also rented an industrial grill/fry truck for $12,000. An accountant would conclude that Bill's profit was A) $30,000. B) $20,000. C) $8,000. D) -$2,000. E) $40,000.
The redistribution of income creates the big tradeoff, which is a tradeoff between ________
A) income and wealth B) equity and efficiency C) rich and poor D) Supplementary Security Income and the Food Stamp program