coneept that increased govemment spending will lead to lower investment and cons
ID: 1124447 • Letter: C
Question
coneept that increased govemment spending will lead to lower investment and consumer A) aggregate demand effect. C) crowding-out effect. 9) The spending is referred to as the B) Keynesian effect. D) inflationary effect 10 10) When government revenues exceed govemment outlays in a particular year, this is called A) a budget surplus C) a budget deficit. B) fiscal policy. D) the national debt. 11) The opportunity cost of holding money is A) the transactions demand for money. C) the monetary rule. B) contractionary monetary policy D) the interest income foregone. 12) 12) The Federal Deposit Insurance Corporation A) insures banks against lawsuits by depositors B) insures the open market operations of the Fed C) insures the deposits held by the Fed. D) insures the deposits held in banks. 13) Which of the following institutions has the responsibility for distributing currency and coins to the13) U.S. banking system? A) the Federal Reserve System B) the U.S. Bureau of Engraving and Printing C) the U.S. Treasury Department D) the Office of the Comptroller of the Currency 14) The largest expenditure component of the federal budget is spending on 14) A) foreign aid. C) environmental protection programs. B) the military D) entitlement programs 15) 15) Are federal budget deficits related to trade deficits? A) No. The budget deficit is entirely a domestic matter while the trade deficit only affects US citizens who travel abroad. B) Yes. As deficit spending goes up, it is likely government borrowing will, too. Then foreign residents who lend funds to the U.S. government have less to spend on our goods, so US exports will fall. C) Yes, but only if the quality of U.S. goods and services is deteriorating D) Yes. If US, consumers buy too many imported goods they don't have money to save and a budget deficit results. 16) 16) Politicians have suggested that the budget deficit could be reduced by A) forbidding interest payments on government bonds outsourcing. B) increasing taxes and reducing expenditures. C) imposing higher tariffs on imported goods. D) lowering the interest rates. B-2Explanation / Answer
9.
The concept that increased government spending will lead to lower investment and consumer spending is referred to as the:
C) crowding-out effect.
Crowding-out effect occurs when initially the government spending increase is offseted by a decrease in investment and consumer spending.
10.
When government revenue exceeds government outlays in a particular year, this is called:
A) a budget surplus.
This is because, in case of budget surplus, government revenue exceeds government expenditure.
11.
The opportunity cost of holding money is:
D) the interest income foregone.
This is becuase, holding money leads to loss of interest which can be earned if it is deposited in a bank.
12.
The Federal Deposit Insurance Corporation:
D) insures the deposits held in banks.
The Federal Deposit Insurance Corporation mainly insures deposits of depositors in case of bank failure.
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