The argument that an increase in aggregate demand, as a result of an increase in government purchases, will be offset by increases in savings (less current consumer spending) for future taxes is called:
a. the crowding out effect
b. the Ricardian equivalence theorem
c. the budget deficit effect
d. the budget surplus effect
b
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As the economy turns the corner into a recession, the level of unplanned inventories ________ and firms ________ production
A) increases; do not change B) decreases; begin to decrease C) increases; begin to decrease D) decreases; begin to increase E) increases; begin to increase
Banks are better at solving the stockholder-lender conflict than rating agencies when they
A) are allowed to hold a substantial ownership stake in the borrowing firm. B) steer clear of holding any ownership stake in the borrowing firm. C) operate in markets-oriented financial systems. D) issue individually-approved loans rather than lines of credit.