What Will Be the Impact on AD and the Budget

question 64

Multiple Choice

What will be the impact on AD and the budget deficit if there is initially a federal budget deficit and government purchases and taxes both rise?

• A)AD increases and the budget deficit decreases.
• B)There is an indeterminate effect on both AD and the budget deficit.
• C)AD decreases and the budget deficit increases.
• D)AD increases and the budget deficit increases.

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Definitions:

Diminishing Marginal Utility

The principle that as a person increases consumption of a product, there is a decline in the additional satisfaction or utility that person gains from consuming one more unit of the product.

Demand Curve

A graph showing the relationship between the quantity of a good that consumers want to buy and its price.

Downward Slope

A graphical representation indicating a decrease or decline in value, often used in reference to graphs showing relationships such as demand curves.

Topographical Map

A type of map characterized by large-scale detail and quantitative representation of relief, usually using contour lines.