If an Economy Is Experiencing Both Full Employment and Price

question 80

Multiple Choice

If an economy is experiencing both full employment and price stability, within the Keynesian model, a major tax reduction probably would cause

• A) an increase in unemployment in the near future.
• B) an increase in the general level of prices unless government expenditures are also reduced.
• C) an increase in the interest rate since individuals will reduce their savings in response to the tax cut.
• D) a decrease in consumption unless the expected budget deficit is financed by selling bonds to foreigners.

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Definitions:

Polygons

Closed, two-dimensional shapes composed of straight lines, with a finite number of sides.

Profit Margin

A financial ratio representing the percentage of revenue that remains as profit after all expenses have been deducted.

ROA

Return on Assets; a financial ratio indicating the profitability of a company relative to its total assets.

Total Assets

The combined value of all owned resources that have economic value and can provide future benefits to the business.