Which of the following statements best describes a stage in the crowding-out effect? The government issues new money, which eventually causes inflation. The government lowers taxes, which motivates producers to increase output. The government issues treasury bonds and spends the revenue on a new highway system. The government increases government spending with revenue generated by higher taxes.

Question

Social Studies

Axel Bright

15 October, 12:10

Which of the following statements best describes a stage in the crowding-out effect? The government issues new money, which eventually causes inflation. The government lowers taxes, which motivates producers to increase output. The government issues treasury bonds and spends the revenue on a new highway system. The government increases government spending with revenue generated by higher taxes.

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Answers (2)

Know the Answer?

Rory Weiss · Answer 1

The government issues treasury bonds and spends the revenue on a new highway system.

Hayes · Answer 2

The correct answer is C) The government issues treasury bonds and spends the revenue on a new highway system.

The statement that best describes a stage in the crowding-out effect is The government issues treasury bonds and spends the revenue on a new highway system.

The economic term "the crowding-out effect" can be understood as the moment when private investment spending is reduced due to a rise in interest rates. What could have a happened was that the government decided to develop the spending in an expansionary fiscal policy determination to promote the economy of a region. The result is an elevation of interest rates. That is why the best example could be when the government issues treasury bonds and spends the revenue on a new highway system.