Question
What may offset the crowding-out effect of deficit spending?
Multiple choice question.
Improved prospects that firms might expect from a fiscal stimulus
Falling interest rates from a fiscal stimulus
Rising interest rates from a fiscal stimulus
Worsening prospects for firms as a result of a fiscal stimulus
Multiple choice question.
Improved prospects that firms might expect from a fiscal stimulus
Falling interest rates from a fiscal stimulus
Rising interest rates from a fiscal stimulus
Worsening prospects for firms as a result of a fiscal stimulus
Answers
GPT-4o mini
The correct answer is:
**Improved prospects that firms might expect from a fiscal stimulus**
This option suggests that if firms anticipate positive outcomes from increased government spending (such as increased demand for goods and services), it can offset the crowding-out effect, where government borrowing leads to higher interest rates and reduced private investment.
**Improved prospects that firms might expect from a fiscal stimulus**
This option suggests that if firms anticipate positive outcomes from increased government spending (such as increased demand for goods and services), it can offset the crowding-out effect, where government borrowing leads to higher interest rates and reduced private investment.