5. Crowding-out effect Which of the following statements is correct? Crowding out refers to the decrease in private investment stemming from an increase in consumer spending. O Large budget deficits may reduce private investment, thereby stifling economic growth. If most of the deficit is spent on current consumption, we expect the economy's productivity to increase. The government must buy bonds from the public to finance its spending. INTEREST RATE Show the crowding-out effect of deficit spending on the demand for investment by moving the dot, dragging the curve, or both. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. INVESTMENT ID ID Point Along ID (?)
5. Crowding-out effect Which of the following statements is correct? Crowding out refers to the decrease in private investment stemming from an increase in consumer spending. O Large budget deficits may reduce private investment, thereby stifling economic growth. If most of the deficit is spent on current consumption, we expect the economy's productivity to increase. The government must buy bonds from the public to finance its spending. INTEREST RATE Show the crowding-out effect of deficit spending on the demand for investment by moving the dot, dragging the curve, or both. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. INVESTMENT ID ID Point Along ID (?)
Chapter12: Federal Budgets And Public Policy
Section: Chapter Questions
Problem 4.9P
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Transcribed Image Text:5. Crowding-out effect
Which of the following statements is correct?
Crowding out refers to the decrease in private investment stemming from an increase in consumer spending.
O Large budget deficits may reduce private investment, thereby stifling economic growth.
If most of the deficit is spent on current consumption, we expect the economy's productivity to increase.
The government must buy bonds from the public to finance its spending.
Transcribed Image Text:INTEREST RATE
Show the crowding-out effect of deficit spending on the demand for investment by moving the dot, dragging the curve, or both.
Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its
original position, just drag it a little farther.
INVESTMENT
ID
ID
Point Along ID
(?)
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