[Solved] Expansionary Fiscal Policy

Crowding out refers to a decline in ________ as a result of an increase in ________. A)tax revenues; unemployment B)government purchases; tax rates C)government purchases; private expenditures D)private expenditures; government purchases E)exports; tariffs

The crowding out of private spending by government spending will be greater the A)less sensitive consumption, investment, and net exports are to changes in interest rates. B)more sensitive consumption, investment, and net exports are to changes in interest rates. C)less sensitive consumption, investment, and net exports are to changes in the price level. D)more sensitive consumption, investment, and net exports are to changes in the price level. E)more sensitive consumption, investment, and net exports are to changes in the marginal tax rate.

An increase in the sensitivity of private spending (consumption, investment, and net exports)to changes in the interest rate ________ the government purchases multiplier. A)will decrease B)will increase C)will not change D)may increase or may decrease

The impact of crowding out may be the least A)during a deep recession. B)when real GDP is above but close to potential GDP. C)during an expansion. D)when real GDP is below but close to potential GDP. E)when technological progress is slow.

In the long run, most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending. A)no B)partial C)complete D)more than complete

In the long run, most economists agree that a permanent increase in government spending leads to A)no decrease in private spending. B)a decrease in private spending by less than the amount that government spending increased. C)a decrease in private spending by the same amount that government spending increased. D)a decrease in private spending by more than the amount that government spending increased. E)an increase in private spending by more than the amount that government spending increased.

Assume that in 2019 aggregate demand in Canada begin to grow much faster than aggregate supply. What policy would you recommend to Parliament? A)The Bank of Canada should raise its target for the target for the overnight rate. B)There should be a decrease in government spending. C)Provincial governments should increase health care spending. D)Income taxes should be lowered to reduce the federal budget surplus and raise interest rates. E)Local governments should increase spending on water treatment systems to offset the damage of extra economic activity on the environment.

In 2009, the federal government introduced Canada's Economic Action Plan an expansionary fiscal policy to try to pull the economy out of the recession, which was A)the largest fiscal policy action in Canadian history. B)second in size only to the fiscal policy action taken during the Great Depression. C)small in comparison to the actions taken during the recession of 1974-1975. D)roughly equal to the spending increases and tax cuts implemented during the recession of 1981-1982. E)the largest increase in interest rates in living memory.

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

As spending on government purchases increases, income rises and money demand falls.