An important similarity between the Keynesian model and theAD/ASmodel is that:in both models, prices change when there is a change in spending.both models allow for government intervention in the short run.both models predict that the economy will move towards full employment automatically.in both models, the price level stays constant when there is a change in spending.in both models real GDP stays constant when there is a change in spending.The best definition of government debt is:the difference between government spending and tax revenue in any one year.it’s always larger than the government deficit.the amount the government spends in any one year.all the money the government owes at any point in time.increasing when the government runs a surplus.The total value of Treasury bonds (T-bonds) in existence at any point in time is:the federal government spending deficit.the trade deficit.less than government spending.necessarily less than GDP.the national debt.If people’s tax rate rises as their income rises, the tax is:progressive.proportional.regressive.a flat tax.discriminatory.Crowding out refers to the situation in which:borrowing by the federal government raises interest rates, causing firms to invest less.foreigners sell their bonds and purchase U.S. goods and services.borrowing by the federal government causes state and local governments to lower their taxes.increased federal taxes to balance the budget cause interest rates to increase, and consumer credit decreases.the government purchases from foreign firms rather than domestic firms.A concern about crowding out caused by increased government borrowing is that:interest rates on private borrowing fall.lower rates of economic growth can result from a decline in business investment spending.the federal government may default on its loans.foreign lenders find it less attractive to help finance federal deficits.the displaced private consumption will create unemployment.
