AP Macroeconomics Crowding Out

If the federal government has a budget deficit and enacts expansionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.

If the federal government has a budget deficit and enacts contractionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.

If the federal government has a balanced budget and enacts contractionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.

If the federal government has a budget surplus and enacts contractionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.

If the federal government has a budget surplus and enacts expansionary fiscal policy, then

• the demand for loans shifts to the left.

• the demand for loans shifts to the right.

• the supply of loanable funds shifts to the right.

• the supply of loanable funds shifts to the left.

Which of the following scenarios will cause interest rates to increase?

• a budget deficit and expansionary fiscal plicy.

• a balanced budget and expansionary fiscal policy.

• A budget surplus and expansionary fiscal policy.

• All of the above.

Which of the following scenarios will cause interest rates to fall?

• A balanced budget with an increase in taxes.

• A budget deficit with a decrease in taxes.

• A budget surplus with an increase in government spending.

• A balanced budget with an increase in government spending.

What is crowding out?

• An decrease in consumption due to higher interest rates from expansionary fiscal policy.

• A decrease to net exports due to higher interest rates from expansionary fiscal policy.

• A decrease to investment due to higher interest rates from expansionary fiscal policy.

What can the Federal Reserve due to help prevent crowding out?

• Increase reserve ratios.

• Decrease personal income taxes.

• Selling government securities to banks.

• Lower the discount rate

Crowding out has what effect on the SRAS and AD demand model?

• Shifts aggregate demand to the right.

• Shifts aggregate demand to the left.

• Shifts short run aggregate supply to the right.

• Shifts short run aggregate supply to the left.