Unit 3 Test
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expansionary fiscal policy
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output
Recessionary Fiscal Policy
Decrease in government spending, increase in taxes, decrease real ouput
An increase in the stock of capital goods will cause the
LRAS to shift rightward
Which of the following best describes the relationship between government budget deficits and national debt?
B. Budget Deficit leads to an increase in national debt
Crowding out due to government borrowing occurs when
C. higher interest rates decrease private sector investment
