Determine if the following statements are true or false. An increase in government spending can crowd out private investment. An improvement in the budget balance increases the demand for financial capital. An increase in private consumption may crowd out private investment. Lower interest rates can lead to private investment being crowded out. A trade balance in surplus increases the supply of financial capital. If private savings is equal to private investment, then there is neither a budget surplus nor a budget deficit.

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Business

London

5 March, 01:14

Determine if the following statements are true or false. An increase in government spending can crowd out private investment. An improvement in the budget balance increases the demand for financial capital. An increase in private consumption may crowd out private investment. Lower interest rates can lead to private investment being crowded out. A trade balance in surplus increases the supply of financial capital. If private savings is equal to private investment, then there is neither a budget surplus nor a budget deficit.

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Huang · Answer 1

Answer: true = 1, 3

false = 2, 4, 5, 6

Explanation:

1. True, If the govt. increases spending the supply and demand for the private sector will diminish.

2. False, Budget balance can be improved from several other measures also.

3. True, if the private consumption comes from the government spending.

4. False. lower interest rates will encourage the businesses to borrow money for expansion.

5. False, trade balance surplus means the export of a company exceeds its imports.

6. False, because private savings and investment are not the only factors constituting budget surplus or deficit.