What is “crowding out”? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.
What will be an ideal response?
Crowding out occurs when deficit spending by the government forces up interest rates and causes investment spending to contract. Some private parties who might have spent money choose instead to lend it to the government by buying bonds. If crowding out occurs, the expansionary effect of a budget deficit is substantially reduced. The crowding-out effect is based on the assumption that the total volume of private saving is fixed. If the government borrows more, private businesses must necessarily borrow less. The appropriate diagram should resemble Figure 32-10, emphasizing the interest rate effect of an expansionary fiscal policy.
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A) there is excess demand for the product in the market. B) the market is in equilibrium. C) the demand curve will shift until the quantity supplied equals the quantity demanded. D) there is excess supply of the product in the market.
Which of the following influences bond ratings?
a. the strength, breadth, and reliability of the tax base b. the historical performance of the revenue stream c. the risk associated with the project d. the underlying economic strength of the stadium or arena or the community e. all of these
The U.S. inflation adjusted poverty threshold in 2014 was set at $35,000 per year for a family of four.
Answer the following statement true (T) or false (F)
Production location is not an important choice when doing business in the European Union.
a. true b. false