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Author Question: Whenever a price floor is imposed above equilibrium price, it is true that: a. supply will increase ... (Read 85 times)

daltonest1984

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on: Jun 30, 2018
Whenever a price floor is imposed above equilibrium price, it is true that:
 a. supply will increase due to a higher price and a surplus will result.
 b. supply will increase due to a higher price until it just equals the quantity demanded.
  c. demand will increase due to a higher price and a shortage will result.
 d. quantity supplied will exceed the quantity demanded.

Question 2

Why does a larger government budget deficit increase the magnitude of the crowding-out effect?


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jojobee318

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Reply #1 on: Jun 30, 2018
Answer to Question 1

d

Answer to Question 2

The crowding-out effect states that the government borrows to pay for the deficit, it drives up the interest rates in the marketplace for all other borrowers. This higher interest rate then discourages consumers and business from borrowing. In other words, the government borrowing for deficit financing crowds out private spending and investment. Therefore, the greater the increase in the deficit, the larger these effects will be.


daltonest1984

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Reply #2 on: Jun 30, 2018
Thank you


jojobee318

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Reply #3 on: Jun 30, 2018
No problemo


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