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:

Erikson

A psychologist known for developing the theory of psychosocial development, which proposes eight stages of human growth and psychological development.

Parent-Child Relationships

The dynamic and affective interactions between parents and their children, which are crucial for the child's development and well-being.

Personality Development

The process of forming and maturing one's personality, influenced by genetic factors, environment, and experiences.

Electra Complexes

Female counterpart to the Oedipus complex in Freudian psychoanalytic theory involving a girl’s psychosexual competition with her mother for possession of her father.