Explain how indirect crowding out can offset expansionary fiscal policy
What will be an ideal response?
If the government increases spending, it must pay for them some way. If it increases borrowing, interest rates increase. Firms will issue fewer bonds because of the higher interest rates, so private investment spending is reduced. This reduction in investment spending partially offsets the increased government spending.
Economics
You might also like to view...
The policy of attempting to obtain a specific low level of inflation over the long run is referred to as:
A) inflation targeting. B) the seigniorage policy. C) the minimal inflation policy. D) price control.
Economics
The price of a computer is $1,000 and the price of a car is $12,000. What is the relative price of a car? What is the relative price of a computer?
What will be an ideal response?
Economics