Suppose that government purchases of goods and services increase by 200 and at the same time lump-sum taxes increase by 200 . Which of the following is true in this case?
a. Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume.
b. The budget deficit will increase by 200.
c. The budget deficit will increase by 400.
d. The budget deficit will decrease as the economy expands.
e. There will be no change in the budget deficit.
Question 2
In April 2010, the U.S. economy added 290,000 jobs but the unemployment rate still increased from 9.7 percent to 9.9 percent. Which of the following best explains this situation?
a. The size of the labor force shrunk.
b. The number of unemployed workers also increased, but by a smaller percentage.
c. The number of illegal immigrants increased substantially.
d. The number of discouraged workers increased substantially.
e. The number of unemployed workers also increased, but by an even greater percentage.
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