Even if the economy has considerable excess capacity,new government spending that creates new jobs involves opportunity costs because

A) goods other than those purchased by government could have been produced and consumed.
B) unemployed workers are unwilling to surrender leisure time to take paid jobs.
C) excess capacity implies that the capital stock exceeds equilibrium.
D) government employment is inefficient relative to jobs in the private sector.
E) expansionary monetary policy stimulates employment without growth of national debt.

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Alidor Bodika · Accepted Answer

Final Answer : A, Explanation :  When the government spends money to create new jobs, it diverts resources away from other uses, such as the production of consumer goods or investments in capital goods. This involves an opportunity cost because the resources (labor, capital, and materials) used to create new jobs could have been used for other purposes, thereby sacrificing the production of alternative goods and services. In addition, excess capacity in the economy does not necessarily mean that there is no opportunity cost to the government's spending, as productive resources may still be more efficiently used in other sectors of the economy.

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