A Decrease in Deficit Spending or an Increase in the Government

question 44

Multiple Choice

A decrease in deficit spending or an increase in the government surplus will lead to

• A) accelerated economic growth if the money supply is increased to stabilize the output ratio.
• B) accelerated economic growth if the money supply is decreased to stabilize the output ratio.
• C) a recession if the money supply is increased to stabilize the output ratio.
• D) a recession if the money supply grows at a fixed rate.

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Definitions:

Price Ceiling

A legal maximum price at which a good can be sold, often set by government to control prices.

Housing Shortage

A situation where the supply of available houses is not sufficient to meet the demand for them in a particular area.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, achieving market equilibrium.

Excise Tax

A tax levied on specific goods, services, or transactions, often included directly in the price of the product like gasoline, alcohol, and tobacco.