The "crowding-out secondary effect expansionary macroeconomic policy a) For fiscal policy it is about government borrowing to finance the government budget deficit, associated with expansionary fiscal policy. This increased government borrowing tends to increase the market rate of interest, which dampens investment spending. b) For monetary policy it is about the expansion of the economy increasing the demand for money to service the increased volume of transactions. This tends to increase the market rate of interest, which dampens investment spending.
The "crowding-out secondary effect expansionary macroeconomic policy a) For fiscal policy it is about government borrowing to finance the government budget deficit, associated with expansionary fiscal policy. This increased government borrowing tends to increase the market rate of interest, which dampens investment spending. b) For monetary policy it is about the expansion of the economy increasing the demand for money to service the increased volume of transactions. This tends to increase the market rate of interest, which dampens investment spending.
Chapter13: Federal Deficits, Surpluses, And The National Debt
Section: Chapter Questions
Problem 13SQ
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QUESTION 5
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05. The "crowding-out secondary effect expansionary
macroeconomic policya) For fiscal policy it is about government borrowing to finance the government budget deficit, associated with expansionary fiscal policy. This increased government borrowing tends to increase the market rate of interest, which dampens investment spending.b) Formonetary policy it is about the expansion of the economy increasing the demand for money to service the increased volume of transactions. This tends to increase the market rate of interest, which dampens investment spending.c) Decreases the autonomous spending multiplier and thus the impact of expansionary policy.d) All of the above.
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