If the Time Path of Government Purchases Does Not Change

question 25

Multiple Choice

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

• A)the interest rate does not change.
• B)the real wage rate rises.
• C)the future capital stock falls.
• D)all of the above.

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Definitions:

Suppliers

Suppliers are businesses or individuals that provide products or services to other businesses or consumers, typically as part of a supply chain.

Agency Problem

In corporations, managers are the agents of stockholders and are often able to take advantage of the relationship by diverting corporate resources to their own use. Excessive pay is the primary example. The general situation is described as the agency problem. Costs associated with controlling the agency problem are agency costs.

Ownership

The legal right or title to an asset or property, with the authority to use, sell, or lease it as the owner sees fit.

Widely Dispersed

Refers to assets, individuals, or entities that are spread out over a large geographic area or among a wide range of categories or types.