The crowding-out effect refers to which of the following?
A) reductions in aggregate demand that occur as the government enacts a fiscal policy that is
intended to eliminate an inflationary gap
B) price increases that result in less purchasing power for consumers
C) increases in consumption spending that leave fewer resources available for the economy to use
to create capital
D) reductions in private investment spending that offset increases in other spending
Answer: D) reductions in private investment spending that offset increases in other spending
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Clauses in life insurance policies that eliminate death benefits if the insured person commits suicide is an example of a
A) restrictive provision. B) restrictive covenant. C) anti-fraud exclusion. D) risk-based deductible.
The producer price index is considered a good predictor of future consumer prices because increases in input prices:
A. eventually make it to consumers when they buy the final product. B. are accounted for in PPI, and therefore this automatically adjusts the CPI. C. are observed first in the PPI, adjusting the CPI downward. D. are used by consumers to make decisions on what to buy.
According to rational expectations theory, what information do businesses and workers use when they form their expectations regarding inflation?
a. Recent events and data. b. Keynesian and monetarist models. c. Forecasts by public-and private-sector economists. d. All the relevant information that is available.
A firm's production process shows constant returns to scale. It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at an average cost of
a. $10,000. b. $5,000. c. $2,000. d. $0.50.