To Compensate for the Possibility of Indirect Crowding Out, a Government

question 101

Multiple Choice

To compensate for the possibility of indirect crowding out, a government engaging in expansionary policy aimed at eliminating a recessionary gap could

• A)increase spending less than the simplest Keynesian model would predict.
• B)increase spending more than the simplest Keynesian model would predict.
• C)reduce taxes rather than increase government spending.
• D)both reduce taxes and reduce spending to be able to achieve full employment.

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Definitions:

Lay Judgments

Decisions or opinions formed by non-experts based on common sense or personal experiences.

Good Target

An object or goal that is deemed particularly worthwhile, desirable, or suitable for pursuit or attention.

Social Expectancies

Presumptions or anticipations about the behaviors that are deemed acceptable or normal within a social context or group.

Self-Fulfilling Prophecy

A belief or expectation that influences actions in a way that causes the belief to become a reality.