Question

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NAME: Multiple choice questions are worth $500 each. WORTH $20000 1. Crowding out occurs when an increase in government spending rate and investment a. increases; decreases b. increases; increases c. decreases; increases d. decreases; decreases the interest 2. The primary leading indicators are approximately years a. 10 b. 25 c. 75 d. 100 s old. 3. The claim that macro needs micro foundations to be accurate is known as the: a. Malthus critique b. Lucas critique c. Classical critique d. conventional critique 4. Business cycles help to illustrate a. the negative relationship between unemployment and GDP b. the negative relationship between inflation and unemployment c. short run fluctuation in the economy d. the impact of monetary policy 5. According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their: a. supply b. equilibrium growth rates. c. relative political power d. marginal productivities. 6. Which of the following would be a statement made by a monetarist? a. Money is non-neutral b. Monetary authorities should follow a rule for money aggregates. c. There is no money illusion. d. The economy is inherently unstable unless impacted by sound monetary policy

Answer 1

Answer 1. a) increases, decreases.

Crowding out occurs when an increase in government spending increases the interest rate and decreases the investment.

(Crowding out effect = An economic theory arguing that rising public sector spending drives down or even eliminates private sector spending.)