Can Deficits Can Have a Positive Effect on the Economy

question 81

Multiple Choice

Can deficits can have a positive effect on the economy?

• A) No, never.
• B) Yes, in the short-run if the economy is at less than full employment.
• C) Yes, in the long-run if the economy is at less than full employment.
• D) Yes, in the short-run if the economy is at more than full employment.

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Definitions:

Diminishing Marginal Utility

The principle stating that as more of a good or service is consumed, the marginal benefit of additional units will decline.

Utility Maximization

The process by which consumers adjust their consumption to achieve the highest level of satisfaction from their available resources.

Marginal Utility

The incremental pleasure or advantage obtained by consuming an extra unit of a good or service.

Price Ratio

The ratio or comparison between the prices of two different goods or services.