QUESTION 505. 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. c) Decreases the autonomous spending multiplier and thus the impact of expansionary policy. d) All of the above.

The crowding out effect is an economic theory arguing that rising public sector spending drives down…

Answered: The "crowding-out secondary effect…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

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Chapter1: Making Economics Decisions

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QUESTION 5

05. 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.
		c) Decreases the autonomous spending multiplier and thus the impact of expansionary policy.
		d) All of the above.

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