If the federal government decreases its expenditures on goods and services by $10 billion and decreases taxes on personal incomes by $10 billion, which of the following will occur in the short run?
A) The federal budget deficit will increase by $10 billion
B) The federal budget deficit will decrease by $10 billion
C) Aggregate income will remain the same
D) Aggregate income will increase by up to $10 billion
E) Aggregate income will decrease by up to $10 billion
Ans: E) Aggregate income will decrease by up to $10 billion
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Refer to the scenario above. Earthland's current account would show a balance of ________
A) -$10 billion B) $10 billion C) -$4 billion D) $14 billion
Consider a perfectly competitive market experiencing good times. In the short run, the equilibrium price will ________ and firms will earn a(n) ________
A) increase; economic profit as the new price exceeds average total cost B) increase; normal profit as the new price exceeds average total cost C) decrease; economic loss as new firms enter the industry D) decrease; economic profit as firms exit the industry E) may increase or decrease; normal profit depending on their costs