If counter-cyclical fiscal policy causes crowding-out, which of the following statements is correct? Select one: A. Crowding-out enhances the effectiveness of fiscal policy by lowering interest rates and increasing investment spending. B. Crowding-out reduces money demand and thereby reduces the effectiveness of fiscal policy. C. Crowding-out reduces the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending. D. Crowding-out increases the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending. E. Crowding-out reduces the effectiveness of fiscal policy by lowering interest rates and reducing investment spending.
If counter-cyclical fiscal policy causes crowding-out, which of the following statements is correct? Select one: A. Crowding-out enhances the effectiveness of fiscal policy by lowering interest rates and increasing investment spending. B. Crowding-out reduces money demand and thereby reduces the effectiveness of fiscal policy. C. Crowding-out reduces the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending. D. Crowding-out increases the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending. E. Crowding-out reduces the effectiveness of fiscal policy by lowering interest rates and reducing investment spending.
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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Transcribed Image Text:If counter-cyclical fiscal policy causes crowding-out, which of the following statements is correct?
Select one:
OA. Crowding-out enhances the effectiveness of fiscal policy by lowering interest rates and increasing investment
spending.
B. Crowding-out reduces money demand and thereby reduces the effectiveness of fiscal policy.
C. Crowding-out reduces the effectiveness of fiscal policy by pushing up interest rates and reducing investment
spending.
D. Crowding-out increases the effectiveness of fiscal policy by pushing up interest rates and reducing
investment spending.
E. Crowding-out reduces the effectiveness of fiscal policy by lowering interest rates and reducing investment
spending.
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