Over time, permanent rises in government purchases will lead to ______.
a. reduction of the crowding-out effect
b. elimination of the crowding-out effect
c. increases in private expenditures
d. decreases in private expenditures
d. decreases in private expenditures
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Households in the United States more completely smooth out expenditures on
A) durable goods and nondurable goods than on services. B) durable goods than on nondurable goods and services. C) nondurable goods and services than on durable goods. D) services and durable goods; nondurable goods.
Suppose the market for loanable funds is in equilibrium. What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?
a. the interest rate and quantity of loanable funds would increase b. the interest rate and quantity of loanable funds would decrease. c. the interest rate would increase and the quantity of loanable funds would decrease. d. the interest rate would decrease and the quantity of loanable funds would increase.
When U.S. farmers in the Southwest irrigate their land, salt in the ground soil leaks into the Colorado River. The Colorado River has become so salty that Mexican farmers further down the river cannot irrigate their own land and Mexican crops have been devastated. This situation constitutes a negative externality because:
Using Figure 4.2, suppose point C represents the optimal mix of public and private goods for a society. The market mechanism is likely to result in a mix of output represented by point
A. C because the market mechanism is efficient. B. B because the market mechanism tends to overproduce public goods. C. F because the market mechanism is inefficient. D. D because the market mechanism tends to underproduce public goods.