Suppose That the Economy Is in the Midst of a Recession

question 266

Multiple Choice

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth?

• A) A congressional proposal to incur a federal surplus to be used for the retirement of public debt.
• B) Reductions in agricultural subsidies and veterans' benefits.
• C) Postponement of a highway construction program.
• D) Reductions in federal tax rates on personal and corporate income.

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Definitions:

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs, representing efficiency.

Opportunity Cost

The cost of choosing one alternative over another, represented by the benefit foregone from not choosing the next best alternative.

Inefficient

Referring to a lack of effectiveness, not achieving maximum productivity; resulting in a waste of time, energy, or material.

Efficient

The state of achieving a maximum output from given resources, with minimal waste or inefficiency.