The "Buy American" Provision in the 2009 Stimulus Package Required

question 26

Multiple Choice

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods,effectively acting as a quota of zero imports when stimulus money was being spent.The "Buy American" provision would ________ consumer surplus and ________ producer surplus for industries that produced protected products in the United States.

• A)increase; increase
• B)increase; decrease
• C)decrease; increase
• D)decrease; decrease

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Definitions:

Producer Surplus

The difference between the amount producers are willing to receive for a good or service and the amount they actually receive, due to higher market prices.

Equilibrium Price

The price at which the quantity of a good or service offered by sellers equals the quantity demanded by buyers, leading to a stable market condition.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.