Did the large U.S. budget deficits in the 1980s “crowd out” investment as some economists had predicted?
A. Yes, investment dropped as predicted.
B. Yes, although investment did not fall nearly as much as some had feared.
C. No, investment was not crowded out, but net exports dropped.
D. No, no crowding out at all occurred.
Answer: C
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A) Milton Friedman; Robert Lucas B) John Maynard Keynes; Robert Solow C) Edward Prescott; Robert King D) James Tobin; Greg Mankiw
Which of the following is not a basis for trade between two nations?
a. different skill levels of the labor forces b. one nation's absolute advantage c. a difference in tastes between countries d. economies of scale e. different capital stocks
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A) sell; increase B) purchase; increase C) purchase; decrease D) sell; decrease
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