The Government has increased spending by TL 12 billion to increase aggregate demand in the economy. The IS-LM model tells us, aggragate demand will increase, but so will interest rates. The Government is worried that increasing interest rates will lead to crowding out. Which policy chould be implemented to keep interest rates at lower levels and prevent crowding out of private investment and consumption? a. The Government reduces taxes on consumption and investment b. Central Bank starts an asset purchasing facility to increase the money supply c. All of the above will have the same effect d. Central Banks increases the reserve ratio to reduce the money supply

The Government has increased spending by TL 12 billion to increase aggregate demand in the economy. The IS-LM model tells us, aggragate demand will increase, but so will interest rates. The Government is worried that increasing interest rates will lead to crowding out. Which policy chould be implemented to keep interest rates at lower levels and prevent crowding out of private investment and consumption? a. The Government reduces taxes on consumption and investment b. Central Bank starts an asset purchasing facility to increase the money supply c. All of the above will have the same effect d. Central Banks increases the reserve ratio to reduce the money supply

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section: Chapter Questions

Problem 4TY

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