When government spending results in higher interest rates due to rising debt, what happens to consumption and investment according to a monetarist economist? Consumption and investment decrease due to the liquidity trap. Consumption and investment increase due to the crowding-out effect. Consumption and investment decrease due to the crowding-out effect. Consumption and investment increase due to the liquidity trap.

When government spending results in higher interest rates due to rising debt, what happens to consumption and investment according to a monetarist economist? Consumption and investment decrease due to the liquidity trap. Consumption and investment increase due to the crowding-out effect. Consumption and investment decrease due to the crowding-out effect. Consumption and investment increase due to the liquidity trap.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 11E

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Question

When government spending results in higher interest rates due to rising debt, what happens to consumption and investment according to a monetarist economist?

Consumption and investment decrease due to the liquidity trap.

Consumption and investment increase due to the crowding-out effect.

Consumption and investment decrease due to the crowding-out effect.

Consumption and investment increase due to the liquidity trap.

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