The "crowding-out" effect refers to the fact that
A) fiscal policy cannot be used to shift the IS curve.
B) rising interest rates tend to accompany an expansionary fiscal policy.
C) there may be a liquidity trap.
D) All of these.
Ans: B) rising interest rates tend to accompany an expansionary fiscal policy.
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Which of the following is likely to happen if the Fed conducts a contractionary monetary policy?
A) Labor demand will increase. B) The nominal interest rate will decrease. C) The stock of money in the economy will decrease. D) Banks will make more loans.
Economics employs a scientific methodology. In part, this means that
a. all economic laws have been proven true by laboratory tests b. there is a single economic theory accepted by all economists c. economic hypotheses are tested to determine their validity d. personal values never enter into economic policy recommendations e. assumptions are not necessary in economic science