Economic theory predicts
A) balanced budgets are impossible to achieve through a democratic political process.
B) budget surpluses are impossible to achieve through a democratic political process.
C) budget deficits are likely to occur through a democratic political process.
D) the absolute size of the budget will be systematically reduced in the long run through democratic political processes.
C
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In order to analyze migration in the long run, it is appropriate to use:
a. the specificfactors model with free movement of labor across borders. b. the HeckscherOhlin model with free movement of labor across borders. c. the Ricardian model with no movement of labor across borders. d. the PPF modified for three goods, three factors of production (all fixed), and three nations.
Consider two alternative worlds: (i) the world works according the real business cycle model, and the central bank acts to stabilize the price level; (ii) the world works according to the New Keynesian sticky price model, and the central bank acts to
make the output gap zero. Which is correct? A) We would prefer to live in world (ii). B) We would prefer to live in world (i). C) The data cannot tell us whether we are living in world (i) or world (ii). D) in either world, the central bank is irrelevant.