The Conventional View Among Economists Is That Persistent Budget Deficits

question 49

Multiple Choice

The conventional view among economists is that persistent budget deficits lead to a ________ capital stock and a ________ level of potential GDP in the long run.

• A) larger; higher
• B) larger; lower
• C) smaller; higher
• D) smaller; lower

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Definitions:

Economic Outcome

The result of economic activities, often measured in terms of growth, employment, and inflation.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price in a specific time period.

Equilibrium Price

The price at which the quantity of goods demanded equals the quantity of goods supplied, commonly referred to as the market-clearing price.

Tax

A mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures.