Government debt "crowds out" private investment because
A) the government and private firms compete in the same market for savings.
B) private firms stop borrowing money when the government enters the market.
C) the government's increased demand for loans decreases interest rates.
D) the government can order the public to buy bonds.
A
You might also like to view...
According to public choice theory, why might government policy benefit only a narrow interest group?
a. If the benefits to the narrow interest group are relatively large, they have an incentive to invest a lot of money and effort in lobbying government. b. If the costs of this policy are spread out among the general population, and are a very small burden for anyone person, then those paying the costs have little incentive to organize opposition. c. Both a. and b. are correct. d. None of the above is correct.
??Exhibit 16A-2 Macro AD/AS Models
?
As shown in Panel (a) of Exhibit 16A-2, assume the economy adopts a classical nonintervention policy. Which of the following would cause the economy to self-correct?
A. ?Competition among firms for workers increases the nominal wage and SRAS shifts rightward. B. ?Long-run equilibrium will be established at Y1 and P2. C. ?Long-run equilibrium will be established at Y1 and P3. D. ?Competition among unemployed workers decreases nominal wages and SRAS shifts rightward.