Suppose initially the federal budget is balanced. The economy then enters a period of expansion. What is likely to happen to the federal budget?

For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?

a. The opportunity cost of producing watches is lower in Denmark. b. The opportunity cost of producing cheese is lower in Denmark. c. The opportunity cost of producing watches is identical in both countries. d. It is impossible to compare opportunity costs because the two countries use different currencies. e. In Germany the opportunity cost of producing one pound of cheese is one watch.

Assume a nation's current production possibilities are represented by the curve AB in the above diagram. Economic growth would best be indicated by a:

A.  Shift in the curve from AB to CD
B.  Shift in the curve from AB to EF
C.  Movement from point 1 to point 2
D.  Movement from point 3 to point 4