If the U.S. inflation rate increases unexpectedly and government revenues, expenditures, and nominal interest rates remain unchanged:
A. both the U.S. real and nominal budget deficits decreases.
B. only the U.S. real budget deficit increases.
C. both the U.S real and nominal budget deficits increases.
D. only the U.S. real budget deficit decreases.
Answer: D
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A tax in an industry would result in: a. a decrease in consumer surplus
b. a decrease in producer surplus c. a decrease in the gains from trade. d. all of the above.
The basic purpose of the other-things-equal assumption is to:
A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. B. allow one to focus upon micro variables by ignoring macro variables. C. allow one to focus upon macro variables by ignoring micro variables. D. determine whether X causes Y or vice versa.