In Which of the Following Situations Does the Government NOT

question 70

Multiple Choice

In which of the following situations does the government NOT need to balance its budget?

• A) if nominal GDP grows faster than the growth in debt
• B) if nominal GDP grows slower than the growth in debt
• C) if inflation is zero
• D) if inflation is higher than the growth in debt

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market equilibrium price.

Binding Price Floor

A legally established minimum price above the equilibrium price, causing a surplus in the market.

Hybrid Cars

Vehicles powered by a combination of an internal combustion engine and one or more electric motors, utilizing both fuel and electricity.

Consumer Surplus

The gap between what consumers are prepared to pay for a good or service and what they actually do pay.