19) The occurrence of financial crowding out implies that:Short-run fiscal expansion increases the size of the public sectorLong-run growth is adversely affected by public spendingDomestic banks benefit at the expense of foreign banksThe long-run Phillips curve is vertical Which of the following statements are true?Only Statement (1) is correctStatements (1) and (3) are correct(3) Statements (1) and (2) are correct(4) Statements (2) and (4) are correct

Crowding out is an economic situation where an expansion in government spending crowd outs the…

Answered: The occurrence of financial crowding…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 4PA

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19) The occurrence of financial crowding out implies that:

Short-run fiscal expansion increases the size of the public sector
Long-run growth is adversely affected by public spending
Domestic banks benefit at the expense of foreign banks
The long-run Phillips curve is vertical

Which of the following statements are true?

Only Statement (1) is correct
Statements (1) and (3) are correct

(3) Statements (1) and (2) are correct

(4) Statements (2) and (4) are correct

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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