If an increase in the federal deficit stimulates an economy,_____.
A)an expansionary gap exists in the economy
B)the crowding in of private investment takes place
C)the crowding out of private investment offsets crowding in of private investment
D)the crowding out and crowding in of private investment cancels each other out
E)interest rates increase significantly

Question

Quizplus · Accepted Answer

An increase in federal deficits stimulates an economy by crowding in private investment. This is because the greater a government deficit is, the more money the government borrows from the private sector, resulting in more investment in the private sector. This increase in private investment leads to economic expansion.

If an Increase in the Federal Deficit Stimulates an Economy,_____