If the economy is operating at full employment and using resources efficiently, then an increase in spending for homeland security this year will:

Question

Quizplus · Accepted Answer

If the economy is operating at full employment and using resources efficiently, an increase in spending for homeland security will require reallocation of resources from other goods and services. This means that the output of some other goods and services will have to fall, as resources cannot be used for both. Therefore, option B is the correct answer. Option A is incorrect as it assumes that resources can be reallocated without sacrificing alternative goods and services. Option C is incorrect as it assumes that there is no scope for any increase in spending. Option D is also incorrect as it assumes that an increase in spending for homeland security would only be possible with an improvement in technology or more resources made available.

If the Economy Is Operating at Full Employment and Using