Consider a Closed-Economy AD/AS Macro Model

question 35

Multiple Choice

Consider a closed-economy AD/AS macro model.A policy-induced increase in the government's budget deficit is most likely to crowd-out private investment if

• A)interest rates decrease sharply as a result of the deficit.
• B)interest rates rise sharply as a result of the deficit.
• C)rising income increases the volume of saving and interest rates rise very little.
• D)there is a very large output gap.
• E)consumers reduce consumption as a result of the deficit.

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Definitions:

Gallons

A unit of volume for liquid measures, used primarily in the United States, equal to four quarts or approximately 3.785 liters.

Standard Costs

Predicted costs for performing a task under normal conditions, used for budgeting and measuring performance.

Work in Process

Inventory consisting of items that are in the production process but are not yet completed, indicating partially finished goods.

Direct Labor

The labor costs directly associated with the manufacture of products or delivery of services.