Homework Answers
Option B.
- The crowding in effect involves the increase in government borrowings and decrease in the taxes.
- This will stimulate more aggregate demand within the economy and create more unemployment.
- The crowding in effect as opposed to the crowding out effect depends on the fact that, a decrease in taxes will cause the output to increase when the aggregate demand increases, which induces more investment.
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13. The crowding-in effect depends on the fact that often a decrease in taxes causes a(n)...
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and...
The crowding-out from expansionary fiscal policy causes real interest rates to (increase/decrease) investment to (decrease/increase) , and aggregate demand to shift (left/right),(decreasing/increasing) the overall impact of expansionary economic policy.
9. Let the MPC in the US is 0.80. With no crowding out effect, if the...
9. Let the MPC in the US is 0.80. With no crowding out effect, if the govt. spending increases by $100 billion, then output/GDP will increase by: a. $20 billion b. $80 billion c. $500 billion d. $1000 billion 10. If the US GDP is less than GNP is year 2017, then which of the following is true? a. Net Factor Payment (NFP) in 2017 was positive for the USA b. Net Factor Payment (NFP) in 2017 was negative for...
Which of the following causes an increase in aggregate demand? a. a decrease in taxes b....
Which of the following causes an increase in aggregate demand? a. a decrease in taxes b. an increase in interest rates c. negative business expectations d. an increase in household debt
Assume that investment spending depends only on the interest rate and no longer depends on output....
Assume that investment spending depends only on the interest rate and no longer depends on output. Given this information, a decrease in money supply: a. will cause investment to increase. b. may cause investment to increase or decrease. c. will have no effect on output. d. will cause a reduction in output and have no effect on the interest rate. e. will cause investment to decrease.
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t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted...
t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
Crowding out occurs when the government Increases taxes, thus causing a decrease in consumption. Issues debt,...
Crowding out occurs when the government Increases taxes, thus causing a decrease in consumption. Issues debt, thus making it more difficult for the private sector to issue debt. Prints money, which displaces currency. Business’ face a lower interest rate of their issuance of bonds
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16. to the wealth effect, an increase in the price level causes ease in real wealth and more purchases b. An incr C. A decrease d. rease in real wealth and fewer purchases se in real wealth and fewer purchases A decrease in r price level increase tends to reduce net exports, thereby reducing the amount of real goods a. The b. The international banner effect C. rvices purchased in the U.S. Economists refer to this phenomenon as international wealth...
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t t Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than...
Question 1 (5 marks) I. Suppose money demand (on the horizontal axis) is plotted against the nominal interest rate (on the vertical axis). This money demand curve will shift to the right when which of the following occurs? a. an increase in income. b. a reduction in the interest rate. c. an increase in the money supply. d. a decrease in the money supply. II. At the current interest rate, suppose the supply of money is less than the demand...
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