The crowding-out effect suggests that
a. expansionary fiscal policy causes inflation.
b. restrictive fiscal policy is an effective weapon against inflation.
c. a reduction in private spending that results from higher interest rates caused by a budget deficit will largely offset the expansionary effects of the deficit.
d. a tax reduction financed by borrowing will increase the disposable income of households and, thereby, lead to a strong expansion in aggregate demand, output, and employment.
C
You might also like to view...
In the long run, if inflation is higher in India than in the U.S., one would expect
A. the dollar to depreciate relative to the rupee B. the rupee to depreciate relative to the dollar C. the rupee to appreciate relative to the dollar D. two of the above are correct
What happens when a nation's currency depreciates?
(A) Its products become cheaper to other nations. (B) Its trade increases. (C) Its trade decreases. (D) Its products become more expensive to other nations.