If an increase in government spending, financed by borrowing, crowded out an equal amount of private spending, which
of the following would result?
(A)Interest rates would decrease.
(B)Aggregate demand would remain unchanged.
(C)The price level would increase.
(D)Unemployment would increase.
(E)Unemployment would decrease.
In the short run, government deficit spending will most likely
(A)raise the unemployment rate
(B)lower the inflation rate
(C)raise nominal interest rates
(D)lower private savings
(E)raise net exports
Crowding out is most likely to occur with which of the following changes?
(A)Decrease in government spending
(B)Increase in budget surplus
(C)Increase in budget deficit
(D)Decrease in the real interest rate
(E)Decrease in trade deficit
Crowding out occurs when
(A)increases in government spending become ineffective because tax revenues increase as income increases
(B)government borrowing to finance its spending decreases private sector investment
(C)monetary policy actions decrease the effectiveness of fiscal policy
(D)restrictive monetary policy causes the interest rate to increase
(E)government spending and private sector spending increase by the same percentage rate
Crowding out refers to the decrease in
(A)national output caused by higher taxes
(B)domestic production caused by increased imports
(C)private investment due to increased borrowing by the government
(D)employment caused by higher inflation
(E)exports caused by an appreciating currency of a country
Crowding out is best described as which of the following?
(A)The decrease in full-employment output caused by an increase in taxes
(B)The decrease in consumption or private investment spending caused by an increase in government spending
(C)The decrease in government spending caused by a decrease in taxes
(D)The increase in the amount of capital outflow caused by the increase in government spending
(E)The increase in the amount of capital inflow caused by the increase in government spending
An increase in government spending with no change in taxes leads to a
(A)lower income level
(B)lower price level
(C)smaller money supply
(D)higher interest rate
(E)higher bond price