A . Explain how public debt can crowd out private investment. b. Even if the crowding out effect does occur, explain the argument that crowding out does not necessarily undermine overall economic growth
a . If private firms must raise the interest rates they offer on their corporate bonds in order to remain
competitive when the government offers bonds for sale, then public debt makes it more costly to
finance private investment. Some private investment that would have occurred at lower interest rates
will no longer take place.
b. Although fewer private investments are made when crowding out occurs, this loss may be partially or
wholly offset by additional public investments that are funded by government borrowing.
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If prices in the current year are higher on average than in the base year, real GDP in the current year ________ nominal GDP in the current year.
A. is equal to B. could be greater than or less than C. is greater than D. is less than
If the United States places a limit on Chinese textile imports, this would be an example of
A. an embargo. B. a quota. C. a regulatory trade restriction. D. a tariff.
Efficient production of a public good requires a. that individuals pay for such goods according to benefits received
b. that each individual's MRS be equal to the RPT of public goods for private goods. c. that the sum of individuals' MRSs be equal to the RPT of public goods for private goods. d. that governments produce at the low point of the average cost curve for the public good.
Aggregate demand grows because
a. patent laws protect and stimulate new inventions. b. there is more machinery and technology improves. c. the government increases its spending, a growing population increases consumer spending, and the Fed increases the money supply. d. All of the above are correct.