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Chapter 23: Problem 12

"Crowding in" refers to federal government deficits a. used for public infrastructure, which will offset any decline in business investment. b. which reduce private business and consumption spending. c. which reduce future rates of economic growth. d. all of the above.

Short Answer

Expert verified
The correct answer is (a): "Crowding in" refers to federal government deficits used for public infrastructure, which will offset any decline in business investment.

Step by step solution

01

Check Option (a)

Evaluate the statement a: "used for public infrastructure, which will offset any decline in business investment." This option suggests that crowding in occurs when the government deficit is used for public infrastructure, which helps to balance a decline in private business investment. This is the correct definition of crowding in - it actually increases private business investment. Therefore, option (a) is correct.
02

Check Option (b)

Evaluate the statement b: "which reduce private business and consumption spending." This option implies that crowding in causes a reduction in private business and consumption spending. However, this is the opposite of the concept of crowding in. In the context of government deficits, this is known as "crowding out". Therefore, option (b) is incorrect.
03

Check Option (c)

Evaluate the statement c: "which reduce future rates of economic growth." This option suggests that crowding in occurs when government deficit spending results in decreased economic growth in the future. This is neither the definition of crowding in nor crowding out. While crowding out can potentially slow down future economic growth, crowding in actually has the opposite effect. Therefore, option (c) is incorrect.
04

Check Option (d)

Evaluate the statement d: "all of the above." Since we have already determined that option (a) is correct and options (b) and (c) are incorrect, option (d) must also be incorrect. Based on our analysis, the correct answer is: \(a:\) "Crowding in" refers to federal government deficits used for public infrastructure, which will offset any decline in business investment.

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Most popular questions from this chapter

Which of the following own a portion of the national debt? a. Federal, state, and local governments b. Private U.S. citizens c. Banks d. Foreigners e. All of the above

The national debt in 2007 a. was about four times larger than in 1980 . b. was twice as large in 1980 . c. was approximately the same size in 1980 . d. was none of the above.

Supply-side economists argue that less government spending a. will contract the productive side of the economy. b. will result in more crowding out. c. causes higher rates of unemployment and inflation. d. would cause interest rates to increase dramatically. e. would make more investment capital available at lower rates of interest to the private sector.

In \(2007,\) the national debt was approximately a. \(\$ 90\) billion. b. \(\$ 900\) billion. c. \(\$ 9\) trillion. d. \(\$ 8\) trillion.

Which of the following statements about crowding out is true? a. It can completely offset the multiplier. b. It is caused by a budget deficit. c. It is not caused by a budget surplus. d. All of the above are true.
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