What Is the Main Argument Which Explains Why an Increased

question 49

Multiple Choice

What is the main argument which explains why an increased public deficit financed tax cut may not result in increased consumption?

• A) people will increase savings to "finance" debt repayment by future generations
• B) people will increase consumption to "finance" debt repayment by future generations
• C) savings is determined by uncertain events, the timing of future illnesses and death
• D) savings is determined by certain events, the timing of future illnesses and death

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Definitions:

Increasing Opportunity Costs

The concept that as the production of one good is increased, the opportunity cost of producing additional units rises.

Production Possibilities Curve

A graph that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.

Bowed Outward

Refers to the shape of a production possibility frontier that shows increasing opportunity costs as production shifts between two goods.

Absolute Advantage

A situation in which a nation, as the result of its previous experience and/or natural endowments, can produce more of a good (with the same amount of resources) than another nation can.