When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called:
A. fiscal policy.
B. crowding out.
C. the multiplier effect.
D. entitlement spending.
Answer: B
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When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level
a. True b. False Indicate whether the statement is true or false
Which of the following statements correctly identifies the difference between an autoregressive model and a vector autoregressive model?
A. In an autoregressive model, the dependent variable is expressed as a function of its own lag, whereas in a vector autoregressive model, the dependent variable is expressed as a function of the lag of an explanatory variable. B. In an autoregressive model, the dependent variable is expressed as a function of the lag of an explanatory variable, whereas in a vector autoregressive model, the dependent variable is expressed as a function of its own lag. C. In an autoregressive model several series are modeled in terms of their own past, whereas in a vector autoregressive model only one series is modeled in terms of its own past. D. In an autoregressive model one series is modeled in terms of its own past, whereas in a vector autoregressive model several series are modeled in terms of their past.
The cyclically adjusted deficit is the difference between annual government expenditures and tax revenues that would have occurred if the economy was:
A. in a recession. B. at zero unemployment. C. at full employment. D. at the trough of the business cycle.
Refer to the information provided in Figure 6.5 below to answer the question(s) that follow.
Figure 6.5Refer to Figure 6.5. Molly's budget constraint is CD. If the price of CDs increases, her new budget constraint becomes
A. AO. B. AD. C. BE. D. EF.