Which of the following are possible consequences of using increased government purchases to stimulate aggregate demand?
I.increase in interest rates
II.increase in the price level
III.increase in the federal budget deficit
IV.increase private investment

Question

Quizplus · Accepted Answer

Increased government purchases can lead to higher interest rates (I) due to increased demand for funds, a higher price level (II) due to increased demand, and a larger federal budget deficit (III) if financed by borrowing. However, it typically does not increase private investment (IV) as higher interest rates can crowd out private investment.

Which of the Following Are Possible Consequences of Using Increased