The Ra M I Fic Ations of a Reduction in GDP

question 3

Multiple Choice

The ra m i fic ations of a reduction in GDP of for example) $10 billion incl u d e s

• A) an immediate reduction in disposable income of about $5 billion.
• B) some significant reduction in retained corporate earnings.
• C) diminished tax collections by federal, state, and local governments.
• D) a contraction of government services created by the fiscal austerity of state and local governments that must balance their budgets.
• E) all of the above.

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Definitions:

Discriminating

The act of making a distinction or differentiating between items, people, or situations, often based on specific criteria.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different consumers, based on their willingness to pay.

Durable Good

A consumer good with an expected life (use) of three or more years.

Elastic Demand

A situation in which the demand for a product or service changes significantly in response to changes in price.