Assume That If There Was No Crowding-Out, an Increase in Government

question 158

Multiple Choice

Assume that if there was no crowding-out, an increase in government spending would increase GDP by $100 billion. On the other hand, if there had been full crowding-out, then GDP would have:

• A) Increased by more than $100 billion
• B) Increased by less than $100 billion
• C) Increased by $100 billion
• D) Not increased

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Definitions:

Forward Rate

The agreed upon exchange rate for a currency transaction that will occur at a future date.

Spot Price

The current market price at which an asset can be bought or sold for immediate delivery.

Canadian Dollars

The currency of Canada, symbolized as CAD, and used throughout the country.

Exchange Rate

In international finance, the rate at which one currency can be traded for another. Spot rates are available for current trades. Forward rates are available for currency to be delivered in a specified period of time.