An Increase in the Government's Budget Deficit ________ the Real

question 83

Multiple Choice

An increase in the government's budget deficit ________ the real interest rate and ________ the equilibrium quantity of national saving.

• A)increases; increases
• B)increases; decreases
• C)decreases; decreases
• D)decreases; increases

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Definitions:

Economies of Scale

Cost advantages that a business obtains due to expansion, leading to a reduction in the average cost per unit through increased production.

Diseconomies of Scale

The situation in which a business grows to a point where the costs per unit increase, opposed to saving costs, often due to managerial inefficiencies or complexity.

Constant Returns to Scale

A situation in which increasing the amount of all inputs used in production by a certain factor results in output increasing by the same factor.

Economies of Scale

Cost advantages that enterprises obtain due to their size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale.