Suppose That the Economy Is in Equilibrium, with the Government

question 138

Multiple Choice

Suppose that the economy is in equilibrium, with the government budget in deficit and with saving less than investment.According to the circular-flow model, how do imports relate to exports?  

• A) Imports must exceed exports. 
• B) Imports must be less than exports. 
• C) Imports must equal exports. 
• D) Imports could be less than or equal to exports.

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Definitions:

Contract Price

The total amount agreed upon in a contract for the sale of goods, services, or property.

Involuntary Conversion

The forced exchange of an asset into a different form or property, often due to theft, casualty or condemnation, with potential tax implications.

Deferred Gain

A profit from the sale of property or an investment that has been realized but not recognized for tax purposes in the current period.

IRC Section 121

A provision in the Internal Revenue Code that allows homeowners to exclude up to $250,000 ($500,000 if married filing jointly) of capital gains on the sale of their primary residence, subject to certain conditions.