Which of the following best describes the crowding-out effect? O An increase in government expenditures will cause taxes to rise, which will reduce both aggregate demand and output. O An increase in borrowing by the government will push interest rates upward, which will lead to a reduction in private spending. An increase in borrowing by the government will decrease the money supply and, thereby, reduce aggregate demand. An increase in government expenditures will cause the general level of prices to fall and, thereby, reduce aggregate demand and output.

Which of the following best describes the crowding-out effect? O An increase in government expenditures will cause taxes to rise, which will reduce both aggregate demand and output. O An increase in borrowing by the government will push interest rates upward, which will lead to a reduction in private spending. An increase in borrowing by the government will decrease the money supply and, thereby, reduce aggregate demand. An increase in government expenditures will cause the general level of prices to fall and, thereby, reduce aggregate demand and output.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) An expansionary fiscal policy increases a government budget deficit or reduces a government budget surplus. True or False 2)Automatic stabilizers are an example of discretionary fiscal policy. True or False 3) A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and reduce borrowing by the Treasury. True or False 4) Selling Treasury bonds to finance a federal deficit crowds out private investment by driving interest rates down. True or False 5) An increase in government transfer payments will shift the aggregate demand curve to the right A. by the initial change in consumption arising from the change in transfer payment × the spending multiplier. B. by the initial change in income arising from the change in transfer payment × the spendingmultiplier. C. by the change in transfer payments × times the spending multiplier. D. by the change in transfer payments × times the marginal propensity to consume. 6) In late 2008,…
Asap both 1.a) Which of the following statements is correct?l.Expansionary fiscal policy is used to remove a recessionary gap.ll. Expansionary fiscal policy is used to shift AD right.A) l onlyB) I onlyC)both I and ID) neither I nor ll 1.b) Which of the following are examples of contractionary fiscal policy?A) decreasing government expendituresB) increasing taxesC) increasing transfer paymentsD) A and B are both contractionary fiscal policiesE) A, B, and C are all contractionary fiscal policies
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5.
The argument that an increase in aggregate demand, as a result of an increase in government purchases, will be offset by increases in savings (less current consumer spending) for future taxes is called: the crowding out effect. the Ricardian equivalence theorem O the budget deficit effect O the budget surplus effect
An open-economy is characterized by the following: C = 750 +0.8 (Y-T) $$1-1500$$ G = 250 T = 200 X = 800 M = 0.4Y
TRUE - OR - FALSE A federal budget surplus occurs when government expenditures exceed tax revenues. O True O False
am. 107.
The government budget constant for an economy is given below: G + TRị + rDt-1-7; = D¿ – Di-1 where G = government spending, TR is transfer payments, rD;-1 is interest payments on public debt, T is tax revenue and D is the stock of public debt. According to the government budget constraint in what way (or ways) can government expenditures be funded? O a. by a combination of tax revenue and borrowing from the public O b. by printing money O c. by tax revenue O d. by borrowing from the public O e. by borrowing from the central bank