If there is initially a federal budget surplus, and taxes and transfer payments:
ID: 2689412 • Letter: I
Question
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. ***** If the real interest rate is below equilibrium, which of the following is likely to occur? a) Lenders will raise their interest rates which will encourage saving. b) Lenders will raise their interest rates which will encourage borrowing. c) Lenders will lower their interest rates which will encourage saving. d) Lenders will lower their interest rates which will encourage borrowing.Explanation / Answer
b) AD increases and the budget surplus increases. c) AD increases and the budget surplus decreases.