Are there any situations in which running a budget deficit is justified? Explain
The two primary justifications for running a deficit are wars and recessions. When a military conflict raises government spending it is reasonable to finance the extra spending by borrowing. During a recession, raising taxes or cutting spending to avoid a deficit would reduce aggregate demand at a time when it needs to be stimulated.
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What variables besides real GDP tend to decline during recessions? Given the definition of real GDP, argue that declines in these variables are to be expected
Opponents of income redistribution argue that
A. redistribution violates the proposition that "one is entitled to the fruits of one's efforts." B. property income is less just than labor income and thus redistribution of that income is justified. C. redistribution encourages too much competition. D. Both A and C are correct.