Explain how a government budget deficit might crowd out private investment
What will be an ideal response?
If there is no Ricardo-Barro effect, a government budget deficit increases the demand for loanable funds. As a result, the equilibrium real interest rate rises and the equilibrium quantity of loanable funds increases. But the rise in the real interest rate decreases investment. The government's budget deficit has thus "crowded out investment."
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Autarky refers to
A) a situation in which there is no trade. B) the equilibrium a nation reaches after trade begins. C) a situation in which nations trade goods and services. D) the location on a consumption possibilities curve.
Gross domestic product (GDP) measures the
A) number of final goods and services produced in the economy in a given time period. B) number of final goods and services sold in the economy in a given time period. C) market value of old and new final goods and services sold in the economy in a given time period. D) market value of final goods and services produced in the economy in a given time period.
Which one of the following are the components of aggregate expenditure?
a. household consumption, business investment, government spending for goods and services, and net exports b. household consumption, business investment, government transfer payments, and net exports c. household consumption, business investment, government spending for goods and services, and exports d. household consumption, business investment, government spending for goods and services, and saving e. household consumption, business inventories, government spending for goods and services, and net exports
?If an individual is living in a period of continued high inflation on a fixed income, then:
a. the cost of the goods and services he or she buys decreases and his or her real income increases. b. the cost of the goods and services he or she buys increases and his or her real income increases. c. the cost of the goods and services he or she buys increases, but his or her real income remains the same. d. the cost of the goods and services he or she buys increases and his or her real income decreases. e. the cost of the goods and services he or she buys decreases and his or her real income remains the same.