If the U.S. government’s budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then:
A. higher interest rates will crowd out private investment.
B. government borrowing is likely to crowd out private investment.
C. an inflationary increase in the price level is a real danger.
D. the central bank might react with an expansionary monetary policy.
Answer:D
If the U.S. government’s budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then:
A. higher interest rates will crowd out private investment. B. government borrowing is likely to crowd out private investment. C. an inflationary increase in the price level is a real danger. D. the central bank might react with an expansionary monetary policy.
Explanation: Type: Multiple Choice