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Explain Why Government Budget Deficits Crowd Out Private Investment Spending

question 40

Essay

Explain why government budget deficits crowd out private investment spending in a closed economy but crowd out net exports in a small open economy. Assume that prices are flexible and that factors of production are fully employed in both economies. Assume that there is perfect capital mobility for the small open economy.


Definitions:

Bonobo Sexual Activity

Describes the variety of sexual behaviors among bonobos, used for social bonding, conflict resolution, and pleasure.

Primate Species

Members of the mammalian order Primates, which includes humans, apes, monkeys, and others, characterized by large brains, forward-facing eyes, and often opposable thumbs.

Female Primate

A member of the primate order distinguished by its female reproductive features, including females from species like apes, monkeys, and humans.

Estrus

In some primate females, the time of sexual receptivity during which ovulation is visibly displayed.

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