In a binding situation, there is ________ crowding out of planned investment when net taxes decrease.
A) complete
B) partial
C) no
D) negative

Question

Quizplus · Accepted Answer

In a binding situation, the interest rate is already high, so even if net taxes decrease, planned investment will not increase as businesses may not want to increase their borrowing at a high interest rate. Therefore, there is no crowding out effect on planned investment.

In a Binding Situation, There Is ________ Crowding Out of Planned