Question :
21) Crowding out, following an increase in government spending, results : 1244884
21) Crowding out, following an increase in government spending, results from (the exchange rate is the foreign exchange price of the domestic currency)
A) higher interest rates and a lower exchange rate.
B) higher interest rates and a higher exchange rate.
C) lower interest rates and a lower exchange rate.
D) lower interest rates and a higher exchange rate.
22) Crowding out will be greater
A) the less sensitive consumption spending is to changes in the interest rate.
B) the further equilibrium GDP is below potential GDP.
C) the more sensitive investment spending is to changes in the interest rate.
D) if the economy is in recession, rather than at full employment.
23) If policy makers implement an expansionary fiscal policy but do not take into account the potential for crowding out, the new equilibrium level of GDP is likely to
A) be at potential GDP.
B) be above potential GDP.
C) be below potential GDP.
D) There is insufficient information given here to draw a conclusion.
24) Following a decrease in government spending, as the price level falls we would expect the level of interest rates to ________ and investment to ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
25) An increase in government spending may expedite recovery from a recession in the short run, but in the long run this policy may
A) reduce investment in new capital.
B) make domestic businesses less competitive in international markets as the dollar appreciates in value.
C) raise interest rates and reduce consumer expenditures on automobiles and new houses.
D) All of the above are correct.
26) Increases in government spending result in ________ in the short run, and permanent increases in government spending result in ________ in the long run.
A) partial crowding out; partial crowding out
B) partial crowding out; complete crowding out
C) complete crowding out; complete crowding out
D) complete crowding out; partial crowding out
27) When President Obama took office in January 2009, he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession. The next month, Congress passed the American Recovery and Reinvestment Act of 2009, a $840 billion package of ________ that was the largest fiscal policy action in U.S. history.
A) spending increases and tax cuts
B) interest rate reductions and increases in the money supply
C) treasury bond purchases and mortgage-backed securities purchases
D) commercial and investment bank bailouts
28) Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009, approximately one-third took the form of ________ and two-thirds took the form of increases in ________.
A) discretionary government spending; transfer payments
B) tax rebates; tax cuts
C) treasury bond purchases; the money supply
D) tax cuts; government expenditures
29) Of the $840 billion American Recovery and Reinvestment Act stimulus package which was enacted in 2009, the largest tax cuts occurred in which category?
A) business tax cuts
B) energy tax cuts
C) individual tax cuts
D) infrastructure tax cuts
30) In preparing their estimates of the stimulus package’s effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. Economist Robert Barro argues that ________, the government purchases multiplier would be lower than the administration’s estimate, and economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo argued that ________, the multiplier would be higher than the administration’s estimate.
A) during a recession; when the inflation rate is relatively low
B) when the unemployment rate is high; when the value of the dollar is depreciating against foreign currencies
C) when the federal budget is in surplus; when government transfer payments are declining
D) during wartime; when short-term interest rates are near zero
