According to the traditional (crowding-out) view, which of the following is most likely to result if a substantial portion of government expenditures is financed by borrowing rather than taxation?
a. no change in interest rates and an increase in saving
b. higher interest rates and an outflow of foreign capital
c. higher interest rates and a reduction in private domestic investment
d. lower interest rates and an inflow of foreign investment
C
You might also like to view...
When a tax alters consumers' incentives, it is:
A. always the explicit purpose of the policy. B. sometimes a side effect of a tax designed to raise revenue. C. called a sin tax. D. meant to encourage increased consumption.
If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private saving must amount to $12,500
a. True b. False Indicate whether the statement is true or false
The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. What is the discriminating monopolist's price in the domestic market?
a. $90 b. $110 c. $70 d. $35
Two examples of governments that printed large quantities of paper currency to finance massive budget deficits, causing hyperinflation, are ________ and ________.
A. the United States during the Great Depression; Germany after World War I B. the Confederacy during the American Civil War; Germany after World War I C. the Confederacy during the American Civil War; Japan after World War II D. the United States during the Great Depression; Japan after World War II