中等ECON-FISC-001
The government borrows to fund a larger deficit. Crowding out means:
A. Taxes are cut by the same amount as the extra spending
B. The long-run Phillips curve shifts left
C. The interest rate tends to rise and private investment falls✓ 答案
D. Imports fall because the exchange rate is fixed at 7.75
解說
Government borrowing adds to the demand for loanable funds. A higher interest rate reduces interest-sensitive private investment, so the rise in demand is smaller than the simple multiplier. It is not a tax cut, and 7.75 is the strong-side exchange rate.