According to economic theory, a person
A) wants to advance his or her own interests and will try to do it rationally.
B) would not generate negative externalities if one has a properly-developed social conscience.
C) acts in a profit-seeking way in the market process and in a social-seeking way in government processes.
D) necessarily behaves as an individualist in markets and as a socialist in government.
A
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For this question, assume that equilibrium output is determined in the ZZ-Y diagram. Further assume that policy makers' goals are (1 ) to achieve balanced trade (i.e., NX = 0); and (2 ) to achieve a target level of output, say YT. Now, suppose that the initial level of equilibrium output is equal to YT (i.e., Y = YT) and that a trade deficit exists at this initial level of output. Which of the
following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A) a reduction in government spending B) convince the country's trading partners to pursue policies that will cause an increase in foreign income (Y) C) a reduction in the real exchange rate D) a reduction in taxes E) a simultaneous increase in government spending and reduction in the real exchange rate F) none of the above
Which of the following most clearly indicates that fiscal policy is becoming more restrictive?
a. An increase in the budget deficit relative to GDP b. A reduction in the budget deficit relative to GDP c. An increase in government expenditures as a share of GDP d. A reduction in tax revenues as a share of GDP