The Crowding-Out Effect of Expansionary fiScal Policy Suggests That

question 70

Multiple Choice

The crowding-out effect of expansionary fiscal policy suggests that

• A) tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
• B) increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
• C) it is very difficult to have excessive aggregate spending in the U.S. economy.
• D) consumer and investment spending always vary inversely.