MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 17, Problem 5QQ
To determine
The Ricardian equivalence.
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The effects of a budget deficit can be offset by:
a. External financing
b. Crowding out
c. A structural deficit
d. All of the above
Crowding out occurs when:
a. Business investment increases due to lower interest rates
b. There is an increase in business borrowing
c. An increase in federal borrowing reduces private borrowing
d. There is an increase in the nations’ savings
If the government wanted to reduce inflation in the economy, it could:
a. Increase income transfers
b. Increase government spending
c. Cut taxes
d. Increase taxes
Assumed that the governemnt maintained a balance budget initially.However, the financial secretary underestimated the recovery of local economy and the budget surplus is resulted.How does the budget surplus affect the loanable fund market? How does this market restore the equilibrium? How is the ‘private sector spending’ affected by the ‘public sector spending’? Explain and illustrate with a well-labelled diagram.
All other things equal, an increase in government borrowing will ________
a.
shift the demand curve for loanable funds to the right, increasing interest rates.
b.
shift the supply curve of loanable funds to the right, decreasing interest rates.
c.
shift the demand curve for loanable funds to the left, decreasing interest rates.
d.
shift the supply curve of loanable funds to the left, but interest rates remain unchanged.
Chapter 17 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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