Suppose the Budget Deficit Is Rising 4 Percent Per Year

question 2

Multiple Choice

Suppose the budget deficit is rising 4 percent per year and nominal GDP is rising 7 percent per year. How are the debt and the burden on future generations created by these continuing deficits?

• A) The debt is sustainable, but the future burden on your children cannot be offset.
• B) The debt is not sustainable, and the future burden on your children cannot be offset.
• C) The debt is sustainable, and the future burden on your children can be offset if you save for them.
• D) The debt is not sustainable, but the future burden on your children can be offset if you save for them.

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Definitions:

Marginal Product

The additional output that results from using one more unit of a particular input, holding all other inputs constant.

Monopsony

A market condition where there is only one buyer for a good or service, giving that buyer significant power over prices.

Competitive Labor

Refers to a labor market characterized by a high level of competition among workers for jobs, often leading to efficiency and innovation but also potentially lower wages.

Quantity of Labor

The total hours of labor supplied by workers or the number of workers employed in the production of goods and services at a given time.