Crowding out refers to the situation in which
a. borrowing by the federal government raises interest rates and causes firms to invest less.
b. foreigners sell their bonds and purchase U.S. goods and services.
c. borrowing by the federal government causes state and local governments to lower their taxes.
d. increased federal taxes to balance the budget causes interest rates to increase and consumer credit to decrease.
A
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The ERT Company sells lead pencils in a perfectly competitive market for $5 per box of a dozen pencils. The firm currently produces 2,500 boxes of lead pencils each week and average total cost at this level of production is $5.15
What level of profit is this firm earning? Explain.
People combining the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes is consistent with
A) frictional unemployment. B) the rational expectations hypothesis. C) active policy making. D) passive policy making.
An increase in the money supply:
a. lowers the interest rate, causing a decrease in investment and an increase in GDP. b. lowers the interest rate, causing an increase in investment and a decrease in GDP. c. lowers the interest rate, causing an increase in investment and an increase in GDP. d. raises the interest rate, causing an increase in investment and an increase in GDP. e. raises the interest rate, causing a decrease in investment and a decrease in GDP.
Gary Becker and Kevin Murphy are among the economists who believe that social factors such as culture, customs, and religion do not explain the choices consumers make.
a. true b. false