A reduction in current consumption to pay for the investment in capital intended to increase future production is known as the:
A. investment trade-off.
B. consumption effect.
C. substitution effect.
D. income effect.
Answer: A
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The process by which an increase in government borrowing results in less borrowing by businesses and consumers for private investment is called
A. expansionary fiscal policy. B. the business cycle. C. crowding out. D. contractionary fiscal policy.
Suppose a plaintiff hires a lawyer to represent her in a court case. The lawyer will be paid a fixed fee. Under this contract,
A) production efficiency is achieved. B) the client bears all of the risk. C) the lawyer has an incentive to lie about his hours worked. D) All of the above.
_____ have faith in the free market (price) system that leads them to favor minimal government intervention
a. New Keynesian economists b. Traditional Keynesian economists c. Monetarist economists d. Traditional classical economists e. New classical economists
Use the following diagram to answer the next question.
Assume the economy is initially at the full employment level of real GDP. An increase in consumption will ________.
A. reduce the full employment level of real GDP B. reduce the unemployment rate C. reduce output in the economy D. reduce the price level