Question 1

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption,$40 billion of investment,$10 billion of net exports,and $20 billion of government purchases.Full-employment GDP is $120 billion.To obtain price level stability under these conditions the government should:

Accepted Answer

A)   increase tax rates and reduce government spending.
B)   discourage personal saving by reducing the interest rate on government bonds.
C)   increase government expenditures.
D)   encourage private investment by reducing corporate income taxes.E) B) and D)
F) A) and B)

Question 2

The crowding-out effect from government borrowing to finance the public debt is reduced when:

Accepted Answer

A)   the economy is experiencing a period of high inflation.
B)   the economy is operating at the full-employment level of output.
C)   public investment complements private investment.
D)   the distribution of income becomes more equal.E) A) and B)
F) All of the above

Question 3

The crowding-out effect of borrowing to finance the public debt:

Accepted Answer

A)   decreases current spending for private investment.
B)   increases the privately owned stock of real capital.
C)   decreases the economic burden on future generations.
D)   increases incentives to work and save.E) B) and C)
F) A) and D)

Exam 13: Fiscal Policy, Deficits, Surpluses, and Debt

The crowding-out effect of borrowing to finance the public debt:

Correct Answer
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The crowding-out effect from government borrowing to finance the public debt is reduced when:

Correct Answer
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Correct Answer
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Exam 13: Fiscal Policy, Deficits, Surpluses, and Debt

The crowding-out effect of borrowing to finance the public debt:

Correct AnswerverifiedShow Answer

The crowding-out effect from government borrowing to finance the public debt is reduced when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified