When crowding out occurs, it ________ the effectiveness of ________ fiscal policy.
A. increases; expansionary
B. reduces; contractionary
C. reduces; expansionary
D. increases; contractionary
Answer: C
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In the above figure, start with the economy in equilibrium at point A. Then an unanticipated reduction in aggregate demand triggers a shift from AD1 to AD2. In the short run, this would cause
A) the price level to move from P1 to P2, but real Gross Domestic Product (GDP) would stay at Y1. B) the price level to fall from P1 to P2, real Gross Domestic Product (GDP) to fall from Y1 to Y2, and the rate of unemployment to increase. C) the price level to fall by some amount less than P1 but greater than P2, and the rate of unemployment would decrease. D) no change in either the price level or real Gross Domestic Product (GDP), but a decrease in unemployment.
The characteristic of games whereby the outcome of the game depends not only on what you do but on what the other players do in response is called
A) strategic interaction. B) mutual interdependence. C) optimal choice analysis. D) decision theory.
Monopolists
A) maximize revenue, not profits. B) have no short-run fixed costs. C) face downward sloping demand curves. D) are price takers.
In the famous allegorical work The Wonderful Wizard of Oz, the symbol for William Jennings Bryant (one-time leader of the free-silver movement) was the
A) Yellow brick road. B) Scarecrow. C) Lion. D) dog named Toto.