Crowding-Out – Principles of Macroeconomics Quiz

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Crowding-Out, Government Spending, Fiscal Policy,Principles of Macroeconomics Final

The key words in this Macroeconomics course include Crowding-Out, Government Spending, Fiscal Policy, Savings, Aggregate Demand, Research and Development (R&D), Medium of Exchange, Aggregate Supply, Function of Money, Principles of Macroeconomics.


Crowding-out occurs when

consumption increases when government spending increases.

time lags crowd out the effects of fiscal policy.

private spending falls in response to increases in government spending.

increases in government spending and decreases in taxes are offset by increases in savings.

supply-side fiscal policy does not increase total output.


The new classical critique of fiscal policy asserts that

increases in government spending and decreases in taxes are largely offset by increases in savings.

recognition lags make it difficult to time fiscal policy.

decreases in government spending and increases in taxes are largely offset by increases in savings.

implementation lags make it hard to get fiscal-policy proposals through the government.

impact lags make it difficult to know how much the spending multiplier will impact the total income in an economy.


Research and development (R&D) tax credits

are examples of automatic stabilizers.

will shift the aggregate demand curve to the right.

are not examples of supply-side fiscal policy initiatives.

allow firms to spend resources to develop new technology, which in turn can lead to future production.

will shift the long-run aggregate supply curve to the left.


Country Y is in the midst of an expansion. If the government wants output to again equal potential output, then it should pursue ________ fiscal policy and shift the ________ curve.

contractionary; long-run aggregate supply (LRAS)

expansionary; aggregate demand (AD)

contractionary; short-run aggregate supply (SRAS)

contractionary; aggregate demand (AD)

expansionary; short-run aggregate supply (SRAS)


What function of money is highlighted when Sally pays her cell phone bill with cash?

commodity money

medium of exchange

fiat money

store of value

unit of account


Money does NOT function as a(n)

store of value.

item to barter.

unit of account.

medium of exchange.

means to buy goods and services.