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In the short-run framework, budget deficits should:

A. never be run since they slow economic growth over the long run
B. never be run since they crowd out investment in the short run
C. be run on a temporary basis whenever the economy is below potential output
D. be run on a permanent basis since they can always be financed by printing money

C. be run on a temporary basis whenever the economy is below potential output.

deficits reduce investment over the long run but may be desirable in the short run if they help stabilize the economy when it falls below potential output
In the long-run framework, budget surpluses:

A. should be run whenever output dips below potential output.
B. should never be run since they crowd out investment in the short run.
C. are better than budget deficits over the long run because unlike budget deficits, they increase saving and investment.
D. should be run on a permanent basis since they boost saving and investment and stimulate economic growth.

C. are better than budget deficits over the long run because unlike budget deficits, they increase saving and investment

Budget surpluses are preferable as long as output is at or above potential output. When this is not the case, budget deficits are advisable since they help to stabilize the economy.
A government can finance its budget deficit by doing all of the following except:

A. buying bonds.
B. borrowing from its central bank.
C. selling bonds.
D. printing money.

A. buying bonds

Government bond purchases involve lending by the government, not borrowing.
Deficits and surpluses are best viewed as:

A. comprehensive measures of government's budget.
B. a summary measure of a nation's fiscal policy.
C. a summary measure of the financial health of the economy.
D. a summary measure of a nation's monetary policy.

B. a summary measure of a

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