20、The crowding-out model suggests that the stimulus effect of increased government expenditures will be modified by changes in real interest rates and the flow of foreign financial capital, because real interest rates will: A. rise and inflows of financial capital from outside the country will increase. B. rise and inflows of financial capital from outside the country will decrease. C. fall and inflows of financial capital from outside the country will increase. D. fall and inflows of financial capital from outside the country will decrease.
Correct answer = A
"Fiscal Policy," Michael Parkin
2008 Modular Level I, Vol. 2, pp. 444-445
Study Session 6-27-b
discuss the sources of investment finance and the influence of fiscal policy on capital markets, including the crowding-out effect
The increase in government borrowing to finance the higher expenditures will put upward pressure on real interest rates. This in turn will slow private investment and attract an inflow of capital from abroad. | 
发表于 2008-5-27 13:24
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