Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 5R, Problem 24MCQ
To determine
The correct option that defines the reason for crowding out due to the changes that occur in the loan-able fund market.
Expert Solution & Answer
Answer to Problem 24MCQ
Option b is correct.
Explanation of Solution
Explanation for the correct option:
b.
The
Explanation for incorrect options:
a.
Due to the rise in loanable fund demand, the interest rates are increased to attain equilibrium. Therefore, option a is incorrect.
c.
A decrease in demand for loanable funds will not lead to a crowding out of the situation. Therefore, option c is incorrect.
d.
The supply of loanable funds decreases as demand increases. Therefore, option d is incorrect.
e.
Crowding out occurs due to the increase in government deficit, a decrease in the supply of funds is not a direct cause. Therefore, option e is incorrect.
Economics Concept Introduction
Crowding out: Investment spending reduces due to a rise in the government budget deficit. This reduction in investment spending due to a negative budget balance refers to crowding out.
Chapter 5R Solutions
Krugman's Economics For The Ap® Course
Ch. 5R - Prob. 1MCQCh. 5R - Prob. 2MCQCh. 5R - Prob. 3MCQCh. 5R - Prob. 4MCQCh. 5R - Prob. 5MCQCh. 5R - Prob. 6MCQCh. 5R - Prob. 7MCQCh. 5R - Prob. 8MCQCh. 5R - Prob. 9MCQCh. 5R - Prob. 10MCQ
Ch. 5R - Prob. 11MCQCh. 5R - Prob. 12MCQCh. 5R - Prob. 13MCQCh. 5R - Prob. 14MCQCh. 5R - Prob. 15MCQCh. 5R - Prob. 16MCQCh. 5R - Prob. 17MCQCh. 5R - Prob. 18MCQCh. 5R - Prob. 19MCQCh. 5R - Prob. 20MCQCh. 5R - Prob. 21MCQCh. 5R - Prob. 22MCQCh. 5R - Prob. 23MCQCh. 5R - Prob. 24MCQCh. 5R - Prob. 25MCQCh. 5R - Prob. 1FRQCh. 5R - Prob. 2FRQCh. 5R - Prob. 3FRQCh. 5R - Prob. 1CTQCh. 5R - Prob. 2CTQCh. 5R - Prob. 3CTQCh. 5R - Prob. 4CTQ
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