If There Is Initially a Federal Budget Surplus, and Taxes

question 47

Multiple Choice

If there is initially a federal budget surplus, and taxes and transfer payments:

• A)there is an indeterminate effect on both AD and the budget surplus.
• B)AD increases and the budget surplus increases.
• C)AD increases and the budget surplus decreases.
• D)AD decreases and the budget surplus increases.
• E)AD decreases and the budget surplus decreases.

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Definitions:

Assumptions

Premises or conditions that are accepted as true without proof, used as a basis for reasoning or conduct in theories and models.

Linear Production

A production process where outputs increase in direct proportion to the amounts of inputs, implying a constant ratio of output to input in production functions.

Pairs of Socks

Articles of clothing worn on the feet, typically coming in matching sets of two, one for each foot.

Linear Production

A production process that assumes a direct, constant relationship between inputs and outputs, often illustrated with a straight-line production function.