What is the crowding-out effect and how does it work?
What will be an ideal response?
The crowding-out effect refers to the decrease in investment that occurs when the government budget deficit increases. An increase in the government budget deficit increases the demand for loanable funds. As a result the real interest rate rises. The rise in the real interest rate decreases—"crowds out"—investment.
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Quotas and tariffs both serve the purpose of
A) increasing foreign trade. B) restricting foreign trade. C) causing domestic producers to lose revenues. D) lowering prices on imported goods.
The relationship between income and education is clear. At every age, those with more education earn more
a. True b. False
In a market economy, who makes the decisions that guide most economic activity?
a. firms only b. households only c. firms and households d. government
Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. A shift in the aggregate demand curve from AD3 to AD2 can be achieved by Federal Reserve action to:
A. Increase the reserve ratio
B. Increase the discount rate
C. Buy government securities in the open market
D. Sell government securities in the open market