Question

_lag. The lag between an increase in government spending and the impact of this increased spending on the economy is called the a. effectiveness b.transmission C. legislative d. data QUESTION 49 Complete crowding out implies that as government increases purchases by $1, a. private spending decreases by $1. b. Real GDP remains unchanged. c. there is an equal offsetting decrease in one or more of the components of private expenditures. d. all of the above e none of the above QUESTION 50 An example of contractionary fiscal policy is a increasing government expenditures while holding taxes constant. b. a decrease in government expenditures, or an increase in taxes, or both. c. a decrease in government expenditures, or a decrease in taxes, or both. d. an increase in government expenditures, or an increase in taxes, or both. e an increase in government expenditures, or a decrease in taxes, or both.

Answer 1

48. Option A

Explanation: Effectiveness is time required for fiscal or monetary policies to be effective and produce the desired results.

49. Option D

Explanation: In complete crowding out, an increase in the government spending is completely neutralized by equivalent decrease in the private spending. Therefore, the net result is an unchanged GDP.

50. Option B

Explanation: In contractionary fiscal policy, the intention is to lower the level of output and inflationary pressure. This is achieved by lowering government spending, increasing taxes or doing both.