The crowding-out effect is the tendency for a government budget deficit to raise the and investment. O A. price level; increase O B. real interest rate; decrease C. quantity of output; increase O D. real wage rate; decrease

The crowding-out effect is the tendency for a government budget deficit to raise the and investment. O A. price level; increase O B. real interest rate; decrease C. quantity of output; increase O D. real wage rate; decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The crowding-out effect is the tendency for a government budget deficit to raise the
and
investment.
O A. price level; increase
O B. real interest rate; decrease
O C. quantity of output; increase
O D. real wage rate; decrease
Click to select your answer.
888
:二。
F7
F6

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An expansionary fiscal policy that takes the form of an increase in government purchases carries the possibility that private investment and, as a result, the future growth rate of O a. Is crowded out, potential output is reduced. O b. Rises to an unsustainable level; real GDP is reduced. O c. Increases, net exports increases. O d. Is crowded out; corporate tax revenue is reduced. e Increases, aggregate demand increases.
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9. Problems and Applications Q9 Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of decreasing the government budget deficit. O True False What would you need to know in order to judge which of these two policies would be more effective way to raise investment? Check all that apply. ✓ The elasticity of private saving with respect to the after-tax real interest rate The responsiveness of private saving to increases in investment ✔The response of private saving to changes in the government budget deficit
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