Increased government spending for investments such as highways or harbours financed by increasing the public debt would most likely:
A)crowd out future public investment.
B)reduce the economy's future productive capacity.
C)increase the amount of public capital stock in the future.
D)increase the amount of private capital stock in the future.

Question

Quizplus · Accepted Answer

Increased government spending for investments such as highways or harbors generally leads to an increase in the amount of public capital stock in the future. This can lead to higher economic growth and increased productivity in the long term. However, if the government finances this spending by increasing the public debt, it can lead to higher interest rates and crowding out of future public investment. It is important to strike a balance between funding investments and managing the public debt.

Increased Government Spending for Investments Such as Highways or Harbours