Suppose the government increases government purchases and there is some crowding out. As a result
A) the rightward shift of the aggregate demand curve due to increased government purchases is reinforced by the crowding out effect.
B) the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect.
C) the rightward shift of the aggregate demand curve due to increased government purchases is completely offset by the crowding out effect.
D) the aggregate demand curve shifts right due to increased government purchases and the short- run aggregate supply curve shifts left due to the crowding out effect.
Ans: B) the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect.
You might also like to view...
The real-balance effect shows that
A) aggregate demand is upward sloping. B) a higher price level leads to higher interest rates. C) a lower price level will increase the purchasing power of currency and increase personal consumption. D) consumption and the price level are positively correlated.
The term "capitalism" refers to which of the following?
a. A religion based on amassing capital. b. An economic system characterized by private ownership of resources, and decentralized market allocation. c. An economic system characterized by government ownership of resources and centralized allocation. d. None of the above answers are correct.
If two foods are perfect substitutes, the cross elasticity between them is
a. zero b. negative c. between zero and one d. infinite e. there is no specific cross elasticity for perfect substitutes
Seth is a surgeon who goes to Cambodia each summer and donates two weeks of his time to local hospitals. From an economic standpoint, utility is gained by:
A. Seth, knowing the local paper writes a story about his trip every time he comes home. B. Seth's patients. C. Seth, knowing he is doing a good deed. D. All of these are true.