Showing the government's budget deficit as a percentage of nominal GDP is a simple way to correct for the effects of both inflation and the ability of the economy to handle the deficit.
What will be an ideal response?
The larger the economy—as measured by GDP—the easier it is to manage a given deficit, since both the fiscal and budgetary impacts of the deficit will be relatively smaller compared to the size of the economy. A bigger economy means that people will have higher incomes and a larger flow of savings is likely to be available to purchase more government bonds, making it easier for the government to borrow
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Which of the following is an example of a good whose price goes down because of improvements in technology?
a) computer printers b) running shoes c) hard-bound books d) typewriters
Under the monetary growth rule proposed by the monetarists, the money supply would grow each year at a constant rate equal to the long-run rate of growth of
A) employment. B) inflation. C) interest rates. D) real GDP.