Question: Consider the following statement: Fiscal policy that involves increases in government purchases always carries a risk of crowding out private investment. Therefore, fiscal policy is

Consider the following statement: “Fiscal policy that involves increases in government purchases always carries a risk of crowding out private investment. Therefore, fiscal policy is not desirable because investment spending is preferable to government spending.” Do you agree with this statement? Briefly explain.

Step by Step Solution

★★★★★

3.48 Rating (151 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Uncertain First it is not necessarily true that increases in government spendi... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

779-E-C-E-T-P (740).docx

120 KBs Word File

Students Have Also Explored These Related Chemical Engineering Questions!

Consider the following statement: If all nominal wages and prices adjusted instantly, there would be no business cycle.Do you agree with this statement? Briefly explain.

Consider the following statement: Central banks control only short-term interest rates, but long-term interest rates are most important for economic activity. Therefore, monetary policy is not...

Consider the following statement. Because economic models cannot precisely predict the effect of policy changes, policymakers should not use them to make predictions about the economy. Do you agree...

answer all Makeover Inc. believes that at its current stock price of $16.00 the firm is undervalued in the market. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The...

Question 22 (1 point) Saved Figure 15-1 Interest MS Rate a 4% 3 d 2. Money Demand Quantity of Money Refer to Figure 15-1. What will happen if the current interest rate is 4 percent? People will sell...

Question 2. Homework #2 International Trade 1. Consider the numerical examples of exercise 1 and 2 on page 52 in Krugman and Obstfeld (8th Edition). Draw the production possibility frontier for each...

If the economy were in a recession and even if the government did not make fiscal policy changes, we would expect government expenditure to be: high and tax revenues to be high, probably leading to a...

Part I: Multiple Choice Questions Q1. Suppose that real money demand is represented by the equation (M/P)d = 0.25*Y. Using the quantity equation, the income velocity of money is a) 2.50 b) 3.00 c)...

Question 1 Not yet answered Marked out of 1.00 Flag question Question text In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption,...

Q2. If income taxes are lowered, we can expect that the income velocity of money will a) Increase due to an increase in income and the interest rate b) Decrease due to an increase in saving and money...

a. Analyze the round-off errors, as in Example 4, for the formula b. Find an optimal h > 0 for the function given in Example 2. f(xo + h) f(xo) f'(xo) = (5) h Ie

Andy Ltd is considering investment in a project with below details. Analyse this investment using Economic Value-Added Method (EVA) only: It is a three-year project with initial investment of $9...

Annual Report Assignments are designed to provide practice and familiarity with an actual corporation s annual report and Form 1 0 - K filing with the US Securities and Exchange Commission ( SEC ) ....

Indicate which of the following statements is (are) correct. (Select as many as are appropriate.) a. The bonds sold for $192,000. b. The bonds sold at a discount because the market interest rate was...

What is the basic determinant of? (a) The transactions demand (b) The asset demand for money? Explain how these two demands can be combined graphically to determine total money demand. How is the...

Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800. Compute and enter in the spaces provided in the accompanying table either the...

Four years ago, you acquired a 30-year loan of $140,100, charging 6.6% annual interest, compounded monthly, and requiring monthly payments. At this time, interest rates on 20-year loans have dropped...

1. Assume that the readings at freezing on a bundle of thermometers are normally distributed with a mean of 0C and a standard deviation of 1.00C. A single thermometer is randomly selected and tested....

A project that provides annual cash flows of $15,800 for 8 years costs $84,292 today. Required: (a)If the required return is 8 percent, what is the NPV for this project? (Click to select)...