The Crowding-Out Effect of Expansionary Fiscal Policy Suggests That

question 166

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.