The 2001 Terrorist Attack Reduced U

question 8

Multiple Choice

The 2001 terrorist attack reduced U.S. aggregate supply in part because it led to

• A)higher insurance premiums.
• B)more powerful labor unions in private industry.
• C)a decline in consumer confidence.
• D)lower oil prices.

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Definitions:

Pigouvian Subsidies

Financial incentives given by the government to encourage activities that have positive external effects on society.

Government Transfers

Payments by the government to individuals for which no good or service is provided in return.

Deadweight Loss

Deadweight loss is the decrease in total surplus (both consumer and producer surplus) that occurs when a market is not in perfect competition, typically due to inefficiencies like taxes, subsidies, or monopolies.

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been accounted for.