Which of the Following Best Describes Most Economists' Approach to Economic

question 62

Multiple Choice

Which of the following best describes most economists' approach to economic stabilization until the 1930s?

• A)Maintain a balanced budget at all times, under the principle of sound finance.
• B)Use a sound finance approach during normal economic times, and a functional finance approach during a recession or a boom.
• C)Run larger deficits during recessions and smaller deficits during economic booms, counting on economic growth to be high enough to keep the debt-to-GDP ratio low.
• D)Economists were wholly concerned with microeconomics and had ignored problems of government deficits, debt, recessions, and economic growth.

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Definitions:

Marginal Cost Function

A mathematical relationship describing how the cost of producing one additional unit of output varies as production scale changes.

Optimal Output

The level of production that maximizes a firm's profit, where marginal revenue equals marginal cost.

Producer Surplus

Producer surplus is the difference between what producers are willing to accept for a good or service versus what they actually receive, reflecting gains from trade.

Economic Rents

Earnings from a factor of production in excess of what is necessary to keep the factor in its current use, often due to limited supply or unique qualities.