If deficit spending causes an increase in economic activity, it may "crowd in" some potential investment spending.

Question

Quizplus · Accepted Answer

Deficit spending can lead to an increase in economic activity, which can create a more favorable environment for potential investment spending. This is because businesses may see increased demand for their products and services, which can lead to higher profits and therefore more willingness to invest in expanding their operations. This phenomenon is known as a "crowding-in" effect, where government spending stimulates private sector investment.

If Deficit Spending Causes an Increase in Economic Activity, It