Budget Deficits Are Inflationary When

question 99

Multiple Choice

Budget deficits are inflationary when

• A)the Federal Reserve contracts the money supply.
• B)the economy has lots of slack and the aggregate supply curve is horizontal.
• C)the economy is at full employment and the aggregate supply curve is vertical.
• D)private citizens buy the bonds to finance the debt.

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Definitions:

Profit-Maximizing Quantity

The manufacturing level where an enterprise attains its greatest possible earnings.

Natural Monopoly

A market condition where due to high fixed or startup costs, a single firm can supply a product or service to an entire market more efficiently than multiple firms could.

Electricity

A form of energy resulting from the existence of charged particles such as electrons or protons, either statically as an accumulation of charge or dynamically as a current.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual amount they receive, usually represented graphically as the area above the supply curve and below the market price.