When Contractionary Fiscal Policy Leads to

question 77

Multiple Choice

When contractionary fiscal policy leads to

• A) less private investment because of higher interest rates, the change in investment is called crowding in by economists.
• B) more private investment because of lower interest rates, the change in investment is called crowding in by economists.
• C) less private investment because of lower interest rates, the change in investment is called crowding in by economists.
• D) less private investment because of higher interest rates, the change in investment is called crowding out by economists.

Understand that the impact of a tax on consumption can depend on the availability of substitutes.

Know the distinction between price elastic and price inelastic demand.

Understand the conditions under which a tax might not reduce consumption of a good.

Appreciate the role of government in regulating consumption through taxation.

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Definitions:

Dependent Variable

In an experiment or study, the variable that is being tested and measured, often to see the impact of variations in the independent variable.

Randomization

In an experiment involves assigning each individual by chance processes.

Control Group

In experimental research, a group of subjects that does not receive the treatment being tested, used for comparison against the group that does.

Random Sampling

A technique for selecting a sample from a population in a way that every member has an equal chance of being chosen.