Bond-financed increases in government spending are MOST likely to be effective when:
A) banks are eager to make loans.
B) the federal government is running a large deficit.
C) the private sector is eager to spend.
D) the private sector is reluctant to spend.

Question

Quizplus · Accepted Answer

Bond-financed increases in government spending are most likely to be effective when private sector spending is low or reluctant, as this can boost overall demand in the economy. If the private sector is already eager to spend, increased government spending may not be as effective in stimulating economic growth. Factors such as banks' willingness to make loans and the federal government's deficit level may have some impact, but the private sector's spending patterns are generally considered the primary determinant of the effectiveness of bond-financed government spending.

Bond-Financed Increases in Government Spending Are MOST Likely to Be