What is the main argument which explains why the data do not show a positive relation between the deficit producing tax cuts in the early eighties savings rates?
A) People will increase savings to "finance" debt repayment by future generations.
B) People will increase consumption to "finance" debt repayment by future generations.
C) Savings is determined by uncertain events, the timing of future illnesses and death.
D) Savings is determined by certain events, the timing of future illnesses.
C
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In the long run, a higher government deficit does not affect equilibrium real Gross Domestic Product (GDP), so that continuous increases in the government deficit will
A) lead to greater tax revenues. B) reduce spending on privately provided goods and services. C) reduce the price level. D) increase the unemployment rate.
The combined effects of a fiscal contraction and a monetary expansion are
A. higher real interest rates. B. exchange rate depreciation. C. increased current account deficit. D. All of these responses are correct.