Use the Following to Answer Questions

question 266

Multiple Choice

Use the following to answer questions :
Figure: The Market for Loanable Funds III
-(Figure: The Market for Loanable Funds III) Look at the figure The Market for Loanable Funds III. If the government in a closed economy is running a budget balance of zero when it decides to increase defense spending by $200 billion and then finances the spending by selling bonds, the government will crowd out a maximum of _____ in private investment spending.

• A)$200 billion
• B)$100 billion
• C)$50 billion
• D)$10 billion

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Definitions:

Price Signals

Indications to consumers and producers about the scarcity or abundance of a good or service, guiding their economic decisions.

Centrally Planned Economies

Economies where the government or central authority makes all the decisions about what goods and services are produced, how they are produced, and who gets them.

Innovation Lagged

A situation where there is a delay or time lag between the development of a new technology or idea and its implementation or widespread use.

Production Targets

Specific goals set for the quantity of products to be produced within a certain time frame.