When crowding out occurs, higher government spending results in higher interest rates, which in turn results in:
A. higher inflation.
B. less consumption and investment.
C. a larger debt ceiling.
D. more tax revenues.
Answer: B
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Given a fixed amount of time, a decision to supply labor or not is simultaneously a decision to
A. demand goods and services or not. B. demand leisure or not. C. supply capital and land or not. D. supply leisure or not.
Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500. You take $500 out of your passbook savings account and put it in your checking account. What is the overall effect on M1 and M2?
A) M1 rises by $500, M2 falls by $500. B) M1 is unchanged, M2 is unchanged. C) M1 rises by $500, M2 is unchanged. D) M1 is unchanged, M2 falls by $500.
Suppose that the price of wheat is above its equilibrium price. You would expect to see
A) a shortage on the market that causes prices to increase further. B) an increase in quantity demanded because of the high price. C) a leftward shift of the demand curve because of the high price. D) sellers begin to lower their prices because of the surplus of wheat.
Changes in future expected interest rates can affect current consumption. Suppose individuals expect future interest rates to decrease. Consumption will change as a result of this lower expected future interest rate because of its effects on which of the following?
A) human wealth B) the value of stocks C) the value of bonds D) all of the above E) none of the above