While increasing government spending stimulates the economy, it also leads to higher interest rates and reduced...
While increasing government spending stimulates the economy, it also leads to higher interest rates and reduced private investment.
| True |
| False |
Homework Answers
True.
When government increases spending, budget deficit rises, to finance which the government resorts to borrowing. Higher borrowing increases interest rate, which decreases private investment (and decreases aggregate demand to the extent investment falls). This is called Crowding out effect.
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While increasing government spending stimulates the economy, it
also leads to higher interest rates and reduced...
When government borrowing leads to higher interest rates, which can in turn reduce private investment, this...
When government borrowing leads to higher interest rates, which can in turn reduce private investment, this is referred to as the indirect crowding-out the direct crowding-out open economy effect none of the above
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cu...
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
(1) Which of the following is not a tool of fiscal policy? Government spending Taxes Tax...
(1) Which of the following is not a tool of fiscal policy? Government spending Taxes Tax incentives Private investment (2) Which of the following statements helps to explain why the economy can be slow to recover from a recession? Workers are less motivated because of reduced expectations, which reduces total output. There is not as much money in circulation to fuel new investment. Wages do not fall quickly, which delays an adjustment to a higher output level....
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use...
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate
In a closed economy, private saving is smaller than investment if government spending exceeds tax revenue....
In a closed economy, private saving is smaller than investment if government spending exceeds tax revenue. Select one: True False If there is a surplus of loanable funds, then neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. Select one: True False An increase in the budget deficit would cause a shortage of loanable funds at the original interest rate, which would lead to falling interest...
The Australian Economy Discuss the arguments FOR government spending on higher education (ie why it...
The Australian Economy Discuss the arguments FOR government spending on higher education (ie why it is appropriate that taxpayer funds should be spent on higher education for individuals). Discuss the arguments AGAINST government spending on higher education (ie why spending on higher education should be private spending)
The largest component of aggregate spending in the Canadian economy is government spending on goods and...
The largest component of aggregate spending in the Canadian economy is government spending on goods and services (G). True False
1. Which of the following properly describes the interest-rate effect? a. A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and serv
1. Which of the following properly describes the interest-rate effect? a. A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and services demanded.b. A higher price level leads to higher money demand, higher money demand leads to lower interest rates, and a lower interest rate reduces the quantity of goods and services demanded.c. A lower price level leads to lower money demand, lower...
Countries with higher savings rates tend to also have greater capital investment and higher growth rates...
Countries with higher savings rates tend to also have greater capital investment and higher growth rates of output per person. True or false?
If an economy is in a recession and the government opts for an expansionary fiscal policy...
If an economy is in a recession and the government opts for an expansionary fiscal policy to shift the AD curve closer to the potential output, a sound finance economist with a Classical view, who holds the Ricardian equivalence theorem to be practically true, would conclude that the AD curve: Multiple Choice shifts to the right due to higher government spending. shifts to the left due to higher government spending. does not shift since the higher government spending is offset...
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
6. Suppose the government stimulates domestic spending by increasing government pur- chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate.
6. Suppose the government stimulates domestic spending by increasing government pur chases or cutting taxes. Use the Mundell-Fleming model to illustrate and explain how this policy affects a small open economy with a fixed exchange rate
The largest component of aggregate spending in the Canadian economy is government spending on goods and services (G). True False
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