The crowding-out effect suggests that:
A. increases in government spending will close a recessionary expenditure gap.
B. increases in government spending may raise the interest rate and thereby reduce investment.
C. increases in consumption are always at the expense of saving.
D. high taxes reduce both consumption and saving.
Answer: B
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Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. At the extreme right end, all 100 voters lie to the left. 
If Candidate X is running against Candidate Z, by moving to the right Candidate X would:
A. force Z to move farther to the right in order to keep the same number of votes. B. not lose any votes from voters on the left and gain some votes from Z. C. lose some votes from voters on the far left but gain approximately the same number of votes from Z. D. win the election if the move placed X anywhere to the right of 25 on the spectrum.
A price floor does not benefit producers
a. True b. False Indicate whether the statement is true or false
A month ago, you bought a one-year bond with a value of $100 that pays a fixed interest rate of 5 percent per year. The interest rate of the economy was also 5 percent. Today you read in the newspaper that the interest rate in the economy increased to 6 percent. You are holding a bond that is:
A. not desirable at all. B. desirable to you. C. less desirable to other investors. D. highly desirable to other investors.
Which of the following is NOT an event that causes BOTH the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve to shift?
A. a change in an economy's labor supply B. technological changes C. a temporary change in the price of a key input D. a change in an economy's endowments of the factors of production