The Large Increases in the Deficit During the 1980s in the United

question 79

Multiple Choice

The large increases in the deficit during the 1980s in the United States were associated with

• A)large increases in public saving.
• B)no change in public saving.
• C)large increases in private saving.
• D)all of the above
• E) none of the above

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Definitions:

Potential Output

The optimum level of real gross domestic product achievable over a prolonged period without triggering higher inflation.

Expected Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling, as anticipated by consumers and businesses.

Short-run Phillips Curve

A curve illustrating the short-term trade-off between inflation and unemployment, suggesting that lower unemployment in an economy can lead to higher inflation rates.

Aggregate Demand Curve

A graphical representation that shows the relationship between the overall price level and the total demand for goods and services in an economy.