Rising interest rates can cause crowding out, but they are also the result of crowding out.
Answer the following statement true (T) or false (F)
True
When the government borrows more funds to finance larger deficits, it puts pressure on financial markets. That added pressure may cause interest rates to rise. If they do, households will be less eager to borrow money to buy cars, houses, and other debt-financed products. Businesses, too, will be more hesitant to borrow and invest. Hence rising interest rates are both a symptom and a cause of crowding out.
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In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Suppose the effect on the buyers was larger than the effect on the sellers
Consequently, in the current market for peanut butter there is a ________ in the price of peanut butter and ________ in the quantity of peanut butter. A) rise; an increase B) rise; a decrease C) fall; a decrease D) fall; an increase
If the quantity supplied responds only slightly to changes in price, then
a. supply is said to be elastic. b. supply is said to be inelastic. c. an increase in price will not shift the supply curve very much. d. even a large decrease in demand will change the equilibrium price only slightly.
A recessionary output gap is defined to be when:
A. equilibrium aggregate expenditure is below full employment GDP. B. equilibrium aggregate expenditure is above full employment GDP. C. government spending is insufficient causing a gap in GDP. D. equilibrium aggregate expenditure is equal to full employment GDP.
All else held constant, if the supply of money is increased ________.
A. the interest rates will rise B. the demand for money will increase C. investment spending will increase D. bond prices will fall