Government \"crowding out\"occurs when an expansion in the money supply creates

Question

Government "crowding out"occurs when an expansion in the money supply creates inflation a contraction in the money supply results in a decrease in domestic investment. the budget deficit causes interest rates to fall. the budget deficit causes interest rates to rise. QUESTION 13 Which of the following policies would you expect to cause a depreciation of the US dollar? A decrease in the corporate tax rate Increased government spending for border protection. Increased government spending for the domestic infrastructure. An increase in the personal tax rate QUESTION 14 What are the endogenous variables in the IS-LM model? Price level and unemployment rate Income and interest rates Exchange rates and money supply Fiscal and monetary policy

Explanation / Answer

a) "D"

Budget deficit causes the interest rate to rise in the economy will lead to crowding out of the private investment.

b) Depreciation of the US dollar would occur when there is inflation in the US economy. That can happen due to large-scale government expenditure. The answer is "C", increased government expenditure for infrastructure.

c) Income and interest rates are endogenous in the IS-Lm model. The answer is "B".  

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