In the Long Run, a Higher Government Deficit Does Not

question 24

Multiple Choice

In the long run, a higher government deficit does not affect equilibrium real Gross Domestic Product (GDP) , so that continuous increases in the government deficit will

• A)lead to greater tax revenues.
• B)reduce the price level.
• C)reduce spending on privately provided goods and services.
• D)increase the unemployment rate.

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Definitions:

Progressive Structure

A tax system where the tax rate increases as the taxable base amount increases, often applied to income tax.

Income-tax System

A government system for assessing and collecting taxes on the income of individuals and businesses.

Ability-to-pay Principle

A taxation principle suggesting that taxes should be levied according to an individual's or entity's capacity to pay, typically measured by income or wealth.

U.S. Labor Force

The total number of people in the United States who are employed or actively seeking employment.