QUESTION 5 Which of the following axemplifies the crowding-out offect? An increa
ID: 1118399 • Letter: Q
Question
QUESTION 5 Which of the following axemplifies the crowding-out offect? An increase in government sponding O is financed by increasing the money supply, reducing interest ratee and causing not exports to tall iu financed by borrowing, raising interest rates and causing private O causes taxes to rise automatically, reducing consumption spending. O causes the price level to riso, reducing net exports investment to fall. QUESTION 6 Use the following diagram to answer the next queation. 0 Tax revenue ($) Refer to the diagram. If the economy's tax rate is currently set at c, a decrease in the tax rate to b wil O shift the curve to the right O increase total tax revenue. increase the size of the deficit. O shift the aggrogate supply curve to the left. QUESTION 7 A major advantage of the buit-in or automatio stabilizers is that they simultaneously stablizo the economy and reduce the absolute size of the public deot automatically produce surpluses during recess ons and defioits during inflat ons require no legislative action by Congress to be made effective guarantee that the Federal budget wiltlbe balanoed over the oourse of the businessExplanation / Answer
Crowding out effect is reffered to as the situation, where an increase in interest rate causes a reduction in private investment spending to fall, which means the initial increase of total investment spending shrinks.
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In the above figure, when the tax rate is set at c, the tax revenue($) is lesser than the point when it is set at point b.
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Built in or automatic stabilizers are the policies which balances the nations economic activities, without the government interveneing in it. So here in the given question, the answer is the third option as the congress doesnt need to put any effort or legislative actions to bemade effective.