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.

---

Definitions:

Accounting Profits

The total revenue of a company minus the explicit costs and expenses directly related to its operations, as shown in its financial statements.

Economic Profits

The difference between a firm's total revenue and its opportunity costs; also known as supernormal profit.

Price Elasticity Of Demand

A measure of how sensitive the quantity demanded of a good is to a change in its price.

Marginal Cost

The increase in total production cost that comes from making or producing one extra item.