Which of these is a correct implication of crowding out when government borrowing rises?
Explanation
Crowding out arises when government borrowing competes for a limited pool of saving, pushing interest rates up and reducing private investment (Chapter 3 Deficits and the National Debt).
Other questions
Which of the following best defines fiscal policy?
Which fiscal instrument is most likely to increase long-term productive potential rather than only short-term demand?
What does the structural (cyclically adjusted) budget deficit intend to measure?
Which statement best captures an argument in favor of worrying about high national debt relative to GDP?
Which of the following is an example of an automatic stabilizer?
Which attribute is NOT usually listed as desirable for a tax system in the chapter?
If the marginal propensity to consume out of disposable income is 0.8 and the proportional tax rate is 0.25, what is the simple fiscal multiplier formula with taxes, and what is its numeric value?
What is the balanced-budget multiplier in the basic Keynesian model and why?
Which of the following describes Ricardian equivalence?
Why might indirect taxes (e.g., VAT) be more useful for quick fiscal adjustments than capital spending?
Which of the following is a principal difficulty in executing discretionary fiscal policy?
Which of the following best describes 'crowding out' as discussed in the chapter?
If the economy is at or near full employment, which is the most likely direct effect of an expansionary fiscal policy raising aggregate demand?
Which of the following components is NOT part of government spending as described in the chapter?
Which of the following best explains why governments pay attention to levels of capacity utilization when deciding on capital expenditure?
Which of the following is the main reason that inventories often fall early in an economic recovery?
What is the typical effect on government budget deficits during a recession, holding policy constant?
Which measure is more appropriate to evaluate whether fiscal policy is getting looser or tighter from one year to the next?
Which of the following best describes why capital spending is often less useful for short-term stabilization?
If a government runs a fiscal expansion and the central bank simultaneously tightens policy (raises interest rates), what is a likely outcome according to the chapter?
Which of the following is the best reason governments use progressive income taxes as an automatic stabilizer?
When evaluating a country's debt burden, why might nominal interest payments overstate the real fiscal burden?
Which of these is a disadvantage of relying on fiscal deficits to stimulate the economy?
Which of the following statements about direct and indirect taxes is consistent with the chapter?
How does the chapter recommend assessing whether fiscal policy is expansionary, contractionary, or neutral over the cycle?
Which is a correct implication of Ricardian equivalence for the effectiveness of tax-cut stimulus?
Which of the following is most consistent with the chapter's view on the relationship between fiscal multipliers and monetary accommodation?
Which of the following best describes an argument against being unconcerned about national debt because most debt is domestically held?
When would fiscal policy likely have its greatest effect on aggregate output, according to the chapter?
What is one key political economy reason why fiscal policy may be easier to loosen than to tighten?
Which of the following best summarizes the chapter's discussion of the debt-to-GDP ratio dynamic?
When a government announces a future tax increase to be introduced a year from now, what is a likely expectational effect according to the chapter?
Which of the following would most likely increase the fiscal multiplier in practice, according to the chapter?
Which of the following best describes a 'pay-as-you-go' fiscal rule as discussed in the chapter?
According to the chapter, which of these is NOT an advantage of capital spending relative to tax cuts?
Which statement is most accurate regarding government interest payments as a share of GDP?
Which of these is a principal reason monetization of government debt is considered risky in the chapter?
Which of the following best captures the interplay between fiscal policy and supply-side constraints?
Which indicator would be most useful to estimate the size of an automatic fiscal stabilizer effect during a downturn?
Which of the following is most consistent with the chapter's treatment of the role of expectations in fiscal policy effectiveness?
Which policy combination is most likely to produce a rapid increase in aggregate demand and low interest rates (in the short term) according to the chapter?
Which of the following examples from the chapter illustrates a case where fiscal stimulus led to notable increases in government debt ratios?
If policymakers want to stimulate demand quickly and expect households to have a high marginal propensity to consume, which fiscal action is likely more potent in the short run according to the chapter?
What is an appropriate reason, from the chapter, for a government to run deficit spending in a recession?
Which of the following is a common empirical finding about recessions accompanied by financial disruptions, according to the chapter?
Which of the following best states why the interpretation of an observed deficit change might be misleading without adjustment?
According to the chapter, which of these is an advantage of automatic stabilizers compared with discretionary fiscal action?
Which of the following scenarios best illustrates a discretionary fiscal tightening?
Which policy mix is most likely to stabilize aggregate demand while avoiding inflation if an economy has a credible inflation-targeting central bank and is near full employment?