What are direct expenditure offsets and how do they influence the effects of fiscal policy?
What will be an ideal response?
When government spending competes with the private sector, direct expenditure offsets may occur. If the government provides lunches for children in school, families can reduce their expenditures on food to some extent. The impacts of fiscal policy actions on real GDP are reduced. In the extreme case, the government spending multiplier may be zero.
You might also like to view...
Suppose a bank has $10 million in deposits with no excess reserves, and the reserve requirement is 25%. If the Fed reduces the reserve requirement to 20%, the bank will now have excess reserves of
A) $0. B) $0.5 million. C) $1.5 million. D) $2 million.
Any non-credible threat that is part of a Nash equilibrium in a sequential game cannot be played along the Nash equilibrium path.
Answer the following statement true (T) or false (F)
Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4)
What is Dustin's long-run average cost if the output is 3,000 copies per day? A) 3.7 cents per copy B) 5.0 cents per copy C) 8.5 cents per copy D) More information is needed to determine the long-run average cost.
Which fundamental economic question is most closely related to the issues of income distribution and poverty?
a. The What to Produce question. b. The Why to Produce question. c. The How to Produce question. d. The For Whom to Produce question.