ROBLEMS AND PROJECTS Label each of the following statements as most likely to be

Question

ROBLEMS AND PROJECTS Label each of the following statements as most likely to be made by a Keynesian (K), a believer in the crowding-out view (CO), a new classical economist (NC), or supply-sider (SS). Ka. "Expansions in government spending financed by borrowing (debt) are a highly effective way to increase aggregate demand in the economy." by higher savings." tions in private consumption; thus, fiscal policy has no effect on aggregate demand." partially offset by the negative effects of higher interest rates caused by government borrowing." and a larger tax base." but rather to promote long-run growth in the economy." restore full employment." b. "Large budget deficits cause high real interest rates that reduce private spending and investment." c. "There is no link between budget deficits and interest rates; higher deficits are simply matched d. "The expansionary effect of increased government spending will be completely offset by reduc- e. "The expansionary effect of increased government spending financed with debt will be at least f. "Lower marginal tax rates stimulate people to work, save, and invest, resulting in more output g. "The primary use of fiscal policy should not be to counter short-run business cycle fluctuations h. "Whenever the economy is in a recession, expansionary fiscal policy should be employed to

Explanation / Answer

Keynesian (K) Crowding out (CO) New classical Economist(NC) New Classical Economist(NC) Crowding out (CO) Supply -sider (SS) New Classical(NC Keynesioan(K)

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