If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: a) government borrowing is likely to crowd out private investment. b) an inflationary increase in the price level is in real danger. c) the central bank might react with an expansionary monetary policy. d) higher interest rates will crowd out private investment.
If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: a) government borrowing is likely to crowd out private investment. b) an inflationary increase in the price level is in real danger. c) the central bank might react with an expansionary monetary policy. d) higher interest rates will crowd out private investment.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 11SQ
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If the U.S. government's budget deficits are increasing aggregate
a) government borrowing is likely to crowd out private investment.
b) an inflationary increase in the price level is in real danger.
c) the central bank might react with an expansionary
d) higher interest rates will crowd out private investment.
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