Question

Macro Qu ×() TurboTax® Tax Preparat? : Topic: Motivation, comm x b4f3f9c7fad71 61487dc413a81 b59e7524/Downloads/Macro%20Quiz%202.pdf D) running high deficits and raising consumer prices 29) When private expenditures spending, this is known as decrease as a result of increased government 29) A) the crowding out effect. B) government deficit spending. C) the stabilizer effect. D) the multiplier effect. 30) If other factors are held constant, what happens when the federal 30) government finances a growing budget deficit by increasing the amount it borrows from the private sector? A) There will be an increase in the interest rate. B) There will be an increase in net exports C) The crowding out effect will be cancelled out. D) There will be a decrease in the interest rate. 31) If the government began providing free textbooks to college students 31) who would otherwise have bought their books from the private sector, the government's action would result in A) an increase in real Gross Domestic Product (GDP). B) a reduction of the government deficit. C) a Ricardian dilemma. D) a direct expenditure offset. 32) 32) Supply-side economics focuses on tax cuts to stimulate A) government spending. B) aggregate demand by reducing saving C) aggregate supply by increasing production. D) military research.

Answer 1

29) A) the crowding out effect

crowding out is a reduction in private expenditure that occurs because of an increase in government borrowing.

30) A) there will be an increase in interest rate

When we rule out monetary accommodation of the deficit, the government needs to create an incentive for the private sector to buy more government bonds.

31) D) a direct expenditure offset

This are the actions on the part of the private sector in spending income that offset govt fiscal policy actions. any increase in govt spending in an area that competes with the private sector will have some direct expenditure offset

32) C) Aggregate supply by increasing production.

Supply-side economists believe that high marginal tax rates strongly discourage income, output, and the efficiency of resource use. They the argue tax cuts are a better form of economic growth and federal spending.