What is meant by crowding out? Explain the difference between crowding out in the short run and in the long run
What will be an ideal response?
Crowding out refers to a decline in private expenditures—consumption, investment, and net exports—as a result of an increase in government purchases. In the short run, an increase in government purchases results in partial crowding out of private expenditures, but in the long run, a permanent increase in government purchases results in the complete crowding out of private expenditures.
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If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then ________
A) each will produce a combination of goods that is within her/his production possibility frontier B) they will lose because they are no longer able to produce and consume both goods C) each will gain because each can consume a combination of goods that is outside her/his production possibility frontier D) one of them will gain and the other will lose
Countries like Germany, Russia, and Zimbabwe have experienced hyperinflation within the last century. It occurred mainly due to the
A. the lack of inflationary controls. B. government mistakenly believed it could “inflate” way its debt. C. government-run dictatorships. D. government believed its policies would attract foreign investment.
If MRS > MRT, then the consumer is better off than at equilibrium
Indicate whether the statement is true or false
If the Federal Reserve System buys government securities from commercial banks and the public:
A. commercial bank reserves will decline. B. commercial bank reserves will be unaffected. C. it will be easier to obtain loans at commercial banks. D. the money supply will contract.