An increase in government expenditure can crowd out consumption and investment expenditure.
Answer the following statement true (T) or false (F)
True
If the government borrows the money from the private sector or taxes the private sector to pay for government expenditures, less credit may be available to finance private consumption and investment, creating an offsetting reduction in private demand. Either way, government spending may 'crowd out' some private expenditure.
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When the economy enters a recessionary phase of the business cycle, unemployment tends to
A) be unchanged. B) increase. C) decrease. D) change in the same direction as the rate of inflation.
New classical economists believe that the classical model
a. with the rational expectations assumption added provides a role for activist stabilization policies. b. is a poor starting point to construct new macroeconomic models. c. with the rational expectations assumption substituted for the perfect information assumption provides a starting point for constructing useful macroeconomic models. d. is equivalent to the monetarist model. e. both c and d.
Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that
a. Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will export coffee. b. Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will import coffee. c. other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will export coffee. d. other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee.
The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have
a. higher production costs and higher profits. b. higher production costs and lower profits. c. lower production costs and higher profits. d. lower production costs and lower profits.