The crowding-out effect stresses that an increase in government expenditures will stimulate aggregate demand and, thereby, help to prevent recessions. an increase in taxés will restrain aggregate demand and, thereby, help to control inflation. additional government borrowing to finance a larger deficit will increase the demand for loanable funds, causing real interest rates to rise. a budget deficit is a highly effective tool with which to combat recessions. O both a and d are correct.

The crowding-out effect stresses that an increase in government expenditures will stimulate aggregate demand and, thereby, help to prevent recessions. an increase in taxés will restrain aggregate demand and, thereby, help to control inflation. additional government borrowing to finance a larger deficit will increase the demand for loanable funds, causing real interest rates to rise. a budget deficit is a highly effective tool with which to combat recessions. O both a and d are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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