According to Mainstream Economic Analysis, a Balanced-Budget Rule for fiScal

question 177

Multiple Choice

According to mainstream economic analysis, a balanced-budget rule for fiscal policy would be

• A) countercyclical.
• B) ineffective.
• C) destabilizing.
• D) pro-growth.

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Definitions:

Average Cost

The total cost divided by the number of goods produced, representing the cost per unit of output.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.

Short Run

Period of time in which quantities of one or more production factors cannot be changed.

Long Run Equilibrium

Long run equilibrium occurs when all inputs can be adjusted by firms, markets are perfectly competitive, and economic profit is zero, leading to a situation where firms just cover their opportunity costs.