Among the following cases, the opportunity cost of crowding out is the smallest when the government spends dollars:
a. staffing the Internal Revenue Service hotline.
b. printing stationery for new members of Congress.
c. placing photographs of the new President in government and diplomatic offices worldwide.
d. on Social Security benefits.
e. on new interstate highways.
QUESTION 2The nominal interest rate:
a. varies directly with the rate of expected inflation in an economy.
b. is the interest rate expressed in dollars of constant purchasing power.
c. equals the difference between the real interest rate and the inflation rate.
d. is the basis for decisions taken by the lenders and the borrowers in an economy.
e. is the percentage increase in the average price level from one year to the next.
QUESTION 3Describe the comparable worth controversy?
QUESTION 4The long-run opportunity cost of government spending crowding out private investment:
a. equals about 10 percent of GDP.
b. lowers interest rates and results in lower interest income for U.S. resource owners.
c. would be greater if the government's expenditures were invested in building better highways and a more educated workforce.
d. results from the corresponding contractionary gap.
e. would be greater if the government's expenditures were devoted to increasing retirement benefits rather than to educating the work force.
QUESTION 5In periods of high inflation, _____.
a. people want to hold as much money as possible
b. the purchasing power of money decreases
c. the real interest rate exceeds the nominal interest rate
d. the nominal interest rates are likely to be low
e. the nominal interest rate equals the real interest rate
QUESTION 6Describe the advantages that a negative income tax has over other programs that have the same purpose.
QUESTION 7Which of the following countries hold the most U.S. Treasury securities?
a. Japan and China
b. Taiwan and Brazil
c. United Kingdom
d. Belgium
e. Switzerland
QUESTION 8If future price changes were perfectly anticipated by both borrowers and lenders, then _____.
a. the expected real interest rate would be higher than the actual rate
b. the expected real interest rate would lower than the actual rate
c. the real interest rate in the future would decrease by the amount of the price increase
d. the real interest rate in the future would increase by the amount of the price increase
e. the real interest rate in the future would remain unchanged
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