Long–Run Consequences of Stabilization Policies
Which outcome is most likely when a country pursues aggressive anti-inflation policies without considering output fluctuations?
Depressed aggregate demand leading potentially to recession.
Balanced government budgets due to controlled spending.
Strengthened domestic currency promoting cheaper imports.
Increased competitiveness abroad from predictable pricing.
If a nation's economy consistently imports more goods than it exports, this will lead to an increasing:
Savings rate
Inflation rate
Trade deficit
Budget surplus
What is the difference between a budget deficit and a budget surplus?
A budget deficit is when tax revenues exceed government spending, while a budget surplus is when government spending exceeds tax revenues
A budget deficit and a budget surplus both represent a situation where government spending exceeds tax revenues
A budget deficit and a budget surplus both represent a situation where tax revenues exceed government spending
A budget deficit is when government spending exceeds tax revenues, while a budget surplus is when tax revenues exceed government spending
Which economic concept suggests that excessive government borrowing might lead to higher interest rates?
Multiplier effect.
Crowding out effect.
Absolute advantage.
Comparative advantage.
If the federal government runs a budget deficit, what is the most likely immediate effect on the national debt?
The budget surplus offsets the national debt.
The national debt increases.
The national debt decreases.
The national debt remains unchanged.
How is the national debt different from a budget deficit?
The national debt and a budget deficit both represent the total amount of money that a country's government has borrowed
The national debt is the shortfall in a single fiscal year's budget, while a budget deficit is the total amount of money that a country's government has borrowed
The national debt is the total amount of money that a country's government has borrowed, while a budget deficit is a shortfall in a single fiscal year's budget
The national debt and a budget deficit both represent the shortfall in a single fiscal year's budget
What is one potential consequence of high national debt for a country's citizens?
It always results in increased government spending
It has no impact on future taxes
It can lead to higher future taxes
It always leads to lower future taxes

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What economic term describes the total amount of money that a government owes at any point in time?
National debt
Budget deficit
Fiscal policy
Trade balance
What is one potential consequence of issuing government bonds to finance a budget deficit?
It can lead to increased national debt
It always results in a budget surplus
It has no impact on the national debt
It always reduces the national debt
When a country borrows money to cover its budget deficit, what happens to its national debt?
It increases
It fluctuates based on inflation rates only
It decreases
It stays the same