The impact of Keynesian Policy can be diminished by secondary effects such as:a)Inflation – to the extent increasing Aggregate Demand causes inflation the impact on expanding the economy is dissipated by higher product pricesb)Crowding-out effect of expansionary fiscal policy - To the extent expansionary Keynesian policy requires a government budget deficit and if this is financed by government borrowing, it may lead to rising interest rates, which will decrease private borrowing to finance investment spending as well as some consumption spending.c)Crowding out effect of monetary policy – As Expansionary policy leads to greater spending, the demand for money for transactions purposes (to buy products) increases, which may increase the interest rate which will crowd out private spending.d)All the abovee)(a) and (b) only 1. The impact of Keynesian Policy can be diminished by secondary effects such as ...(a) Inflation to the extent increasing Aggregate Demand causes inflation the impact on expanding the economy is dissipated by higher product prices.(b) Crowding-out effect of expansionary fiscal policy - To the extent expansionary Keynesian policy requires a government budget deficit and if this isfinanced by government borrowing, it may lead to rising interest rates, which will decrease private borrowing to finance investment spending as well asOsome consumption spending.(c) Crowding out effect of monetary policy - As Expansionary policy leads to greater spending, the demand for money for transactions purposes (to buyproducts) increases, which may increase the interest rate which will crowd out private spending.(d) All the above.(e) (a) and (b) only

Keynesian theory is a part of the macroeconomics study that explains the impact of any variation in…

Answered: The impact of Keynesian Policy can be…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 3.11P

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The impact of Keynesian Policy can be diminished by secondary effects such as:

a)Inflation – to the extent increasing Aggregate Demand causes inflation the impact on expanding the economy is dissipated by higher product prices

b)Crowding-out effect of expansionary fiscal policy - To the extent expansionary Keynesian policy requires a government budget deficit and if this is financed by government borrowing, it may lead to rising interest rates, which will decrease private borrowing to finance investment spending as well as some consumption spending.

c)Crowding out effect of monetary policy – As Expansionary policy leads to greater spending, the demand for money for transactions purposes (to buy products) increases, which may increase the interest rate which will crowd out private spending.

d)All the above

e)(a) and (b) only

1. The impact of Keynesian Policy can be diminished by secondary effects such as ...
(a) Inflation to the extent increasing Aggregate Demand causes inflation the impact on expanding the economy is dissipated by higher product prices.
(b) Crowding-out effect of expansionary fiscal policy - To the extent expansionary Keynesian policy requires a government budget deficit and if this is
financed by government borrowing, it may lead to rising interest rates, which will decrease private borrowing to finance investment spending as well as
Osome consumption spending.
(c) Crowding out effect of monetary policy - As Expansionary policy leads to greater spending, the demand for money for transactions purposes (to buy
products) increases, which may increase the interest rate which will crowd out private spending.
(d) All the above.
(e) (a) and (b) only

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