Which of the following best describes the crowding-out effect?
a. An increase in government expenditures will cause taxes to rise, which will reduce both aggregate demand and output.
b. An increase in borrowing by the government will push interest rates upward, which will lead to a reduction in private spending.
c. An increase in borrowing by the government will decrease the money supply and, thereby, reduce aggregate demand.
d. An increase in government expenditures will cause the general level of prices to fall and, thereby, reduce aggregate demand and output.
B
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The problem of "scarcity" applies
A) only in industrially developed countries because resources are scarce in these countries. B) only in underdeveloped countries because there are few productive resources in these countries. C) only in economic systems that are just beginning to develop because specialized resources are scarce. D) to all economic systems, regardless of their level of development.
If production involves increasing opportunity cost, then moving nearer the horizontal axis will increase the opportunity cost of
a. the good that is shown on the horizontal axis. b. the good that is shown on the vertical axis. c. both of the goods shown on the axes. d. neither of the goods shown on the axes.