The occurrence of financial crowding out implies that: Short-run fiscal expansion increases the size of the public sectorLong-run growth is adversely affected by public spendingDomestic banks benefit at the expense of foreign banksThe long-run Phillips curve is verticalWhich of the following statements are true?(A) Only Statement (1) is correct(B) Statements (1) and (3) are correct(C) Statements (1) and (2) are correct(D) Statements (2) and (4) are correct

The crowding out effect occurs when higher interest rates cause a decrease privately investment…

Answered: The occurrence of financial crowding…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The occurrence of financial crowding out implies that:

Short-run fiscal expansion increases the size of the public sector
Long-run growth is adversely affected by public spending
Domestic banks benefit at the expense of foreign banks
The long-run Phillips curve is vertical

Which of the following statements are true?

(A) Only Statement (1) is correct

(B) Statements (1) and (3) are correct

(D) Statements (2) and (4) are correct

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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