An increase in consumption, investment, or net exports caused by a decrease in government purchases is known as

Question

Quizplus · Accepted Answer

Crowding in refers to the phenomenon where a decrease in government purchases leads to an increase in private sector spending, hence, the increase in consumption, investment, or net exports. This is in contrast to crowding out, where the decrease in government spending leads to a decrease in spending by the private sector, and hence, no net increase in aggregate demand. Demand-side effects refer to the effects of policy on aggregate demand, but they do not specifically refer to the situation described in the question. A closed economy refers to an economy that does not engage in international trade, and is not relevant to the situation described in the question.

An Increase in Consumption, Investment, or Net Exports Caused by a Decrease