If an economy is in a recession and the government opts for an expansionary fiscal policy to shift the AD curve closer to potential output, an economist with a typical functional finance view, who acknowledges partial crowding out, would conclude that the AD curve:
A. does not shift since the higher government spending is offset by lower private consumption.
B. does not shift since the higher government spending is offset by higher private consumption.
C. shifts to the right due to higher government spending.
D. shifts to the left due to higher government spending.
Answer: C
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The tendency for private saving to increase in response to growing government deficits is known as the
A) crowding out effect. B) money illusion effect. C) Keynes effect. D) Ricardo-Barro effect.
Staggered, overlapping contracts mean
A) the contract between workers and firms can be opened for renegotiation if other key firms in the industry have signed a new contract within the last ninety days. B) each firm within an industry agrees to negotiate with the union according to a schedule. C) not all labor contracts within the economy expire at the same time. D) different contracts are reached for the different skill classifications of workers within a firm.
The Tea Act:
a. raised the price of tea to colonists. b. allowed for more "middlemen" to be involved in the exportation of tea from India to America. c. made tea an "enumerated good" under the Navigation Acts. d. harmed smugglers of Dutch tea.
If the Fed wishes to reduce the money supply, it can sell U.S. government securities to member banks
a. True b. False Indicate whether the statement is true or false