Why might fiscal stimulus crowd out investment?
What will be an ideal response?
Fiscal stimulus, such as an increase in government expenditure or a decrease in taxes, increases the budget deficit. The increase in the budget deficit increases the (government's) demand for loanable funds, thereby raising the real interest. The higher real interest rate decreases—crowds out—investment.
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Those economists who view the AS curve as being vertical see more government tools capable of raising Real GDP than do the economists who view the AS curve as being upward-sloping
Indicate whether the statement is true or false
A profit maximizing price taker will produce at a level where
a. the wage equals the marginal product of labor. b. the marginal revenue product of labor equals the price of their output. c. the wage rate equals the price of their output. d. the marginal revenue product of labor equals the wage rate.