A Drug Interdiction Program That Successfully Reduces the Supply of Illegal

question 47

Multiple Choice

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

• A)raise the price,reduce the quantity,decrease total revenues,and decrease crime.
• B)lower the price,increase the quantity,increase total revenues,and increase crime.
• C)raise the price,increase the quantity,decrease total revenues,and increase crime.
• D)raise the price,reduce the quantity,increase total revenues,and increase crime.

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product where aggregate supply equals aggregate demand, indicating a stable economy with no tendency for change in the price level or output.

Multiplier

Any change in spending (C, I, or G) will set off a chain reaction leading to a multiplied change in GDP. Equation is 1/(1 - MPC).

Federal Budget Deficit

A situation where the government's expenditures exceed its revenues over a specific fiscal period.

Real Interest Rates

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to investors.