The following diagram represents an economy in which government spending increases. PPF PPF2 C2 12 (0,0) Leisure, I -G2 Economists would say that "government spending is creating a crowding-out effect". What does it mean? Overall production in the economy is decreasing Although GDP is increasing, private consumption decreases due to the increase in taxes needed to finance the increase in government spending Leisure is increasing, which causes labor income to decrease, which means that consumers can afford less private consumption O Government spending decreases productivity in the economy Consumption, C

The following diagram represents an economy in which government spending increases. PPF PPF2 C2 12 (0,0) Leisure, I -G2 Economists would say that "government spending is creating a crowding-out effect". What does it mean? Overall production in the economy is decreasing Although GDP is increasing, private consumption decreases due to the increase in taxes needed to finance the increase in government spending Leisure is increasing, which causes labor income to decrease, which means that consumers can afford less private consumption O Government spending decreases productivity in the economy Consumption, C

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 6E

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