A federal budget deficit
a. occurs when government expenditures exceed tax revenues.
b. occurs when monetary policy works in the opposite direction of fiscal policy.
c. occurs when tax revenues exceed government expenditures.
d. occurs when transfer payments exceed tax revenues.
e. will always result when Congress and the president cannot agree on expenditures.
Answer: a. occurs when government expenditures exceed tax revenues.
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In the circular flow model, profits are considered to be
A) a cost of doing business. B) equal to zero, or else the circular flow would be out of balance. C) a subtraction from the Gross Domestic Product (GDP). D) a form of interest payment.
The long-run average cost curve may initially slope downward due to
A) decreasing average fixed costs. B) increasing marginal returns. C) economies of scale. D) All of the above.