Which of the Following Statements About the Effects of an Increase

question 89

Multiple Choice

Which of the following statements about the effects of an increase in government purchases is most accurate?

• A) In the classical model,it will cause complete crowding out.In the short-run macro model,crowding out will be incomplete.
• B) In the classical model,it will cause incomplete crowding out.In the short-run macro model,crowding out will be complete.
• C) Crowding out will be complete in both the classical and short-run macro model.
• D) Crowding out will be incomplete in both the classical and short-run macro model.
• E) In the classical model,the increase in government spending will lead to a decrease in investment spending and autonomous consumption.In the short-run macro model,it will not.

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Definitions:

Deposits

Money placed into a financial institution for safekeeping, which can earn interest over time.

Excess Reserves

The amount of reserve funds that a bank holds beyond what is required by regulations, which can be loaned out or invested.

Actual Reserves

The sum of money a bank holds in its vault or with the central bank, ready to satisfy withdrawal requests or comply with regulatory obligations.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposits, as mandated by monetary authorities.