Which of the situations is an example of the crowding-out effect on investment as it pertains to macroeconomics? - The government of Walla Walla spent $4.3 billion dollars and collected $2.2 billion dollars in tax revenue. - Candex, an eyeglass frame company, decides to cut the price on all of its frames to $10, which successfully drives out all other firms from the market. - The government deficit is at an all-time high in the United States. As such, people begin to save more money in fear that taxes will increase in the future. - Jack wants to borrow money to create a cowboy-themed inflatable bounce house for kids called "Wild Wild West." However, the government is running a deficit which has increased interest rates so much that Jack can no longer afford to borrow the money.
Which of the situations is an example of the crowding-out effect on investment as it pertains to macroeconomics? - The government of Walla Walla spent $4.3 billion dollars and collected $2.2 billion dollars in tax revenue. - Candex, an eyeglass frame company, decides to cut the price on all of its frames to $10, which successfully drives out all other firms from the market. - The government deficit is at an all-time high in the United States. As such, people begin to save more money in fear that taxes will increase in the future. - Jack wants to borrow money to create a cowboy-themed inflatable bounce house for kids called "Wild Wild West." However, the government is running a deficit which has increased interest rates so much that Jack can no longer afford to borrow the money.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Which of the situations is an example of the crowding-out effect on investment as it pertains to macroeconomics ?
- The government of Walla Walla spent $4.3 billion dollars and collected $2.2 billion dollars in tax revenue.
- Candex, an eyeglass frame company, decides to cut the price on all of its frames to $10, which successfully drives out all other firms from the market.
- The government deficit is at an all-time high in the United States. As such, people begin to save more money in fear that taxes will increase in the future.
- Jack wants to borrow money to create a cowboy-themed inflatable bounce house for kids called "Wild Wild West." However, the government is running a deficit which has increased interest rates so much that Jack can no longer afford to borrow the money.
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