The Long-Run Effect of Reducing the Government Budget Deficit Would

question 39

Multiple Choice

The long-run effect of reducing the government budget deficit would be

• A) a higher price level and a lower level of output
• B) a lower price level and a lower level of output
• C) a higher price level and a higher level of output
• D) a higher price level with unchanged output
• E) a lower price level with unchanged output

Explain the concept of demand curve and its relationship with price and quantity.

Comprehend the role of the price system in sending signals to buyers and sellers.

Recognize the effect of price changes on quantity supplied and quantity demanded.

Understand the causes and effects of shortages and surpluses in the market.

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Definitions:

Average Revenue

The revenue per unit of output sold, calculated by dividing total revenue by the number of units sold.

Marginal Revenue

The additional revenue that is gained from selling one more unit of a good or service.

Purely Competitive Firm

An enterprise that operates in a perfectly competitive market, where it is a price taker due to the homogeneity of products and the presence of many buyers and sellers.

Market Price

The market rate at which an asset or service can currently be acquired or disposed of.