Economics For Today
9th Edition
ISBN: 9781305507074
Author: Tucker, Irvin B.
Publisher: Cengage Learning,
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Question
Chapter 23, Problem 16SQ
To determine
The correct statement regarding the crowding out effect.
Expert Solution & Answer
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Check out a sample textbook solutionStudents have asked these similar questions
Which one of the following statements is TRUE about the concept of crowding out?
Select one:
a. Crowding out causes the textbook multiplier to become larger
b. “Crowding out” occurs because the Fed increases money supply and lowers interest rate
c. “Crowding out” occurs because the Govt increases govt expenditures and this causes private consumption and investment to increase
d. “Crowding out” occurs because the Govt increases govt expenditures and this causes private consumption and investment to decrease
Assume an economy is in recession and the government is considering using fiscal stimulus measures to boost spending, production and employment.
c) Explain how the 'crowding out' problem associated with increased government spending can be avoided. In your answer identify any additional policy that is needed.
1) Under which of the following scenarios would an expansionary fiscal policy be more effective?
Group of answer choices
a) Households consume more and MPC is higher.
b) Households consume less and MPC is lower.
c) Interest rate increases.
d) Households save more to prepare for tax increases in the future.
e) The government makes it more difficult for households to borrow.
Chapter 23 Solutions
Economics For Today
Ch. 23.3 - Prob. 1.1YTECh. 23.3 - Prob. 1.2YTECh. 23.3 - Prob. 2.1YTECh. 23.3 - Prob. 2.2YTECh. 23 - Prob. 1SQPCh. 23 - Prob. 2SQPCh. 23 - Prob. 3SQPCh. 23 - Prob. 4SQPCh. 23 - Prob. 5SQPCh. 23 - Prob. 6SQP
Ch. 23 - Prob. 7SQPCh. 23 - Prob. 8SQPCh. 23 - Prob. 9SQPCh. 23 - Prob. 10SQPCh. 23 - Prob. 11SQPCh. 23 - Prob. 1SQCh. 23 - Prob. 2SQCh. 23 - Prob. 3SQCh. 23 - Prob. 4SQCh. 23 - Prob. 5SQCh. 23 - Prob. 6SQCh. 23 - Prob. 7SQCh. 23 - Prob. 8SQCh. 23 - Prob. 9SQCh. 23 - Prob. 10SQCh. 23 - Prob. 11SQCh. 23 - Prob. 12SQCh. 23 - Prob. 13SQCh. 23 - Prob. 14SQCh. 23 - Prob. 15SQCh. 23 - Prob. 16SQCh. 23 - Prob. 17SQCh. 23 - Prob. 18SQCh. 23 - Prob. 19SQCh. 23 - Prob. 20SQ
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Similar questions
- Which of the following is not an automatic stabilizer? A. Unemployment compensation. B. Defense spending. C. Progressive income tax rates (that is, higher marginal tax rates that rise with income). D. All of the answers are automatic stabilizersarrow_forwardAssume an economy is in recession and the government is considering using fiscal stimulus measures to boost spending, production and employment. b) Explain how 'crowding out' can harm productivity growth.arrow_forwardHow will the deficit for the bottom line budget of $3.1 trillion affect the economy?arrow_forward
- Government spending increases national debt and can cause a crowding-out effect. Explain what the crowding-out effect is and why it’s considered a negative effect of increased government spending.arrow_forwardDuring difficult economic times, why are uniform across-the-board budget cuts poor fiscal policy?arrow_forward
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