18. If the government of a country is implementing a policy of increasing taxes in order to reduce aggregate demand, then which of the following is true for the economy of the country?

A. The economy is experiencing a balanced budget. B. The economy is experiencing a depression. C. The economy is experiencing a recessionary gap. D. The economy is experiencing inflationary pressures. E. The economy is experiencing steady growth.

19. Assume that it takes 2 hours of labor to produce a unit of good X and 6 hours of labor to produce a unit of good Y. What is the opportunity cost of producing 2 units of good Y?

A. 1/6 unit of good X B. 2 units of good X C. 4 units of good X D. 6 units of good X E. Zero opportunity cost, if all the labor is currently employed

20. Which of the following best explains the difference between the value-added approach and the expenditure approach for measuring the GDP?

A. The value-added approach considers the profits from intermediate goods, while the expenditures approach considers the money spent on final goods and services. B. The value-added approach considers only the sales price of final goods and services, while the expenditures approach considers the profits from the sales of intermediate goods. C. The value-added approach considers the income earned at each stage of a product's creation, while the expenditures approach considers only the input prices at the final production stage. D. The value-added approach considers the prices of inputs for final goods and services, while the expenditures approach considers only the income earned at each stage of a product's creation. E. The value-added approach considers the money spent buying productive output, while the expenditures approach considers the profits from the sales of intermediate and final goods.

21. The United States and the countries of Europe are trading partners. If the average income of dollar holders increases, what should be the result in the market for the euro, the currency of many European countries?

A. There will be an increase in the supply of euros as Europeans try to sell more goods to the United States. B. There will be an appreciation of the dollar as U.S. citizens try to spend more dollars. C. There will be an increase in the demand for euros as U.S. citizens want euros to purchase European goods. D. There will be a reduced supply of euros as Europeans retain their currency to buy European goods. E. There will now be a trade deficit, with Europeans buying more U.S. goods than the United States buying European goods.

22. As year 2 begins, suppose a country has a debt of $24 million. If the government has an added deficit of $37 million in Year 2, then how much is the public debt at the end of Year 2?

A. $13 million B. $24 million C. $37 million D. $61 million E. $85 million