Government expenditure increases government borrowing

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Reference no: EM131095957

Choose the statement that is incorrect.

A. an increase in government expenditure increases government borrowing (or decreases government lending if there is a budget surplus) and lowers the real interest rate.

B. The government expenditure multiplier is the quantitative effect of a change in government expenditure on real GDP.

C. If the only consequence of increased government expenditure is crowding-out of investment, the government expenditure multiplier is less than1.

D. If the only consequence of increased government expenditure is an increase in consumption expenditure, the government expenditure multiplier is greater than 1.

Reference no: EM131095957

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