Until the onset of the most recent recession in 2009, Canadian governments (federal and provincial)had been running budget surpluses for about 10 years. Economic theory suggests that, other things being equal, these budget surpluses will lead to

Question

Quizplus · Accepted Answer

Budget surpluses increase national saving, which leads to a decrease in interest rates and an increase in investment and net exports. This is known as "crowding in" of investment and net exports. A rise in interest rates and a "crowding out" effect would occur if the government was running budget deficits, which would decrease national saving. The other choices are not consistent with economic theory.

Until the Onset of the Most Recent Recession in 2009