The crowding-out effect refers to the tendency of
a. the additional borrowing accompanying larger budget deficits to increase interest rates and reduce private spending.
b. higher future taxes accompanying budget deficits to reduce private consumption.
c. the inflation rate to rise when the unemployment rate is low.
d. increases in private savings to reduce interest rates and, thereby, crowd-out government expenditures.
A
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
All central banks are controlled by government
Indicate whether the statement is true or false
As global financial markets become more intertwined, the Fed has
A) less control over monetary policy. B) more control over monetary policy. C) more control over fiscal policy. D) less control over fiscal policy.
A vector autoregression
A) is the ADL model with an AR process in the error term. B) is the same as a univariate autoregression. C) is a set of k time series regressions, in which the regressors are lagged values of all k series. D) involves errors that are autocorrelated but can be written in vector format.