For this question, assume that policy makers are pursuing a fixed exchange rate regime. Now suppose that households decide to increase consumption because of, for example, an increase in consumer confidence. Given this information, we would expect which of the following to occur?

If government purchases exceed tax revenue, there is a budget deficit

a. True b. False Indicate whether the statement is true or false

A country has pasture land where cattle are allowed to graze. However, this land is threatened by overgrazing, which can lead to erosion and a reduction in the value of the land. Which of the following solutions is socially optimal?

a. Selling the pasture land to a private buyer and letting him control the grazing time b. Providing extra security to prevent grazing c. Using a layer of artificial grass to prevent grazing d. Constructing fences and allowing grazing only in one part of the pasture land at a time