Question

Q30. When an insect infestation wipes out cotton crops in the south, consumer prices for cotton-based goods ____ while cotton production in other regions ____.

decreases, decrease

increase, increases

decreases, increase

increases, decrease

Q31. When a budget drops into deficit, a government can attempt to plug the gap by ____.

borrowing, cutting spending, raising taxes, all of the above

Q38. Discretionary fiscal policy is limited by the fact that ____ of the federal budget is non-discretionary.

80% - 100%

0% - 20%

20% - 40%

60% - 80%

Answer 1

Answer (30) : Insect infestation cause shortage of supply for cotton crops. When supply is less than demand of cotton production then price of cotton based goods will increase while cotton production in other region increase.

​​​​​​(when compared which region where insect infestation occured.)

Hence answer is (b) increase , increase.

Answer (31) : Government can attempt to plug gap by All of above.

Because cutting spending includes cut down expenses , raising taxes includes increase government revenue and decreasing purchasing power of people in economy and borrowing includes financing funds to payment for deficit budget.

Hence concluded that above three can be used by government to reduce gap in deficit budget.

Answer is (d) All of the above.

Answer (38) : Discretionary fiscal policy is limited by the fact that 60% - 80% of the fedral budget is non discretionary.

It is so because discretionary spending is 35%. Then obviously non discretionary is (100-35) = 65%. 65% rangea between 60% - 80%.

Answer is (d) 60% - 80%.

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