Question

Expansionary fiscal policy falls short of its goal. Some economists claim it is due to indirect crowding out. What evidence is consistent with this claim?

Select one:

a. A reduction in consumer spending

b. The interest rate increased

c. Saving increased

d. The price level increased

The tendency for expansionary fiscal policy to cause a reduction in planned investment spending by the private sector is called

Select one:

a. the indirect effect.

b. the interest rate effect.

c. the crowding-out effect.

d. the Laffer effect.

Multiplier effects take time to work through the economy, which is known as the

Select one:

a. action time lag.

b. effect time lag.

c. recognition time lag.

d. Ricardian-equivalence time lag.

An advantage of automatic stabilizers over discretionary fiscal policy is that

Select one:

a. automatic stabilizers are not subject to all the same time lags that discretionary fiscal policy is.

b. automatic stabilizers can be easily fine-tuned to move the economy to full employment.

c. only the Prime Minister is involved in implementing automatic stabilizers instead of both the Prime Minister and Parliament.

d. the Ricardian equivalence theorem applies more readily to automatic stabilizers than to discretionary fiscal policy.

Automatic stabilizers are

Select one:

a. provisions that cause changes in government spending and taxes that do not take the action of Parliament.

b. the policies set by certain committees in Parliament.

c. the tools used by the Prime Minister's Council of Economic Advisers.

d. provisions that cause the aggregate supply curve to be upward sloping.

Answer 1

( 1 ) ( B ) The interest rate increased

Because sometimes government adopts expansionary fiscal polices and increases the spending to boost the economic activity which leads to an increase in the interest rate .

( 2 ) ( C ) the crowing out effect .

Its a situation in which the increased interest rate lead to reduction in private investment spending such that the there is an initial increase in the total investment spending .

( 3 ) ( B ) effect time lag .

As its the amount of time between the action is taken and an effect is realize .

( 4 ) ( A ) automatic stabilizers are not subject to all the same time lags that discretionary fiscal policy is.

( 5 ) ( A ) Provisions that cause changes in government spending and taxes that do not take the action of Parliament.

As the Automatic stabilizers balances output and demand . A changes in government spending and taxes without any deliberate legislative action . Congress doesn't have to vote on them .