The crowding-out effect indicates that budget deficits
a. will stimulate aggregate demand and, therefore, exert a strong impact on output and employment.
b. will lead to additional borrowing and higher interest rates that will reduce the level of private spending.
c. are highly appropriate when the threat of inflation is present.
d. are highly appropriate when the threat of recession is present.
B
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Which of the following cannot be an effective entry barrier?
A) a firm making very high economic profits B) a firm being granted a patent for its product C) a firm owning all of a vital resource needed to produce a good D) when huge economies of scale exist
Which of the following would cause a currency to depreciate in a flexible exchange rate market?
a) Rising domestic interest rates. b) Reduced demand for imported goods. c) Increased investment abroad. d) A surge in foreign demand for a country's goods.