To Make Up for a Shortfall in Its Annual Budget

question 215

Multiple Choice

To make up for a shortfall in its annual budget, the government must borrow money by

• A) issuing government (Treasury) bonds.
• B) buying government (Treasury) bonds.
• C) reducing its total public debt.
• D) selling government stock.

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Definitions:

Implicit Costs

The opportunity costs that arise from using assets, resources, or funds to undertake an action instead of another activity, not directly recorded in financial statements.

Explicit Costs

Direct monetary expenses incurred in the course of doing business, such as wages, rent, and materials.

Peak Efficiency

The optimal point at which a particular process or system operates with maximum effectiveness or efficiency.

MC = MR

The point where Marginal Cost equals Marginal Revenue, considered the optimal point of production for maximum profit.