Assume that the federal government is attempting to counter a negative shock through fiscal policy. The federal government increases government spending by $350 billion. As a result of this policy change, the net change in total economic activity (including the increased government spending) is a decrease of $25 billion. Which of the following is most likely to be true? O the multiplier effect is larger than any crowding out effect O crowding out is not present O the increase in government spending led to a substantial increase in exports O the government has a lot debt already and is likely to default

Assume that the federal government is attempting to counter a negative shock through fiscal policy. The federal government increases government spending by $350 billion. As a result of this policy change, the net change in total economic activity (including the increased government spending) is a decrease of $25 billion. Which of the following is most likely to be true? O the multiplier effect is larger than any crowding out effect O crowding out is not present O the increase in government spending led to a substantial increase in exports O the government has a lot debt already and is likely to default

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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