Assume the Government Incurs a Budget Deficit Which Is Financed

question 105

Multiple Choice

Assume the government incurs a budget deficit which is financed by borrowing.As a result, interest rates rise and the volume of private investment spending declines.This illustrates:

• A)the equation-of-exchange effect.
• B)the paradox of thrift.
• C)the crowding-out effect.
• D)the money-fund effect.

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