Question

In contrast to the conclusions drawn from microeconomics, many economists would argue that in macroeconomics government:

a) An increase in government spending leads to a decrease in private investment.
b) An increase in government spending leads to a decrease in government debt.
c) An increase in government spending leads to a decrease in inflation.
d) An increase in government spending leads to a decrease in the trade deficit.

Answer 1

According to Keynesian macroeconomics, an increase in government spending leads to a decrease in private investment and government debt.

Step-by-step explanation:

According to Keynesian macroeconomics, an increase in government spending leads to a decrease in a) private investment and b) government debt. In contrast to microeconomics, where increased government spending can lead to increased private investment, in macroeconomics, excessive government spending can crowd out private investment in physical capital, slowing down economic growth. Additionally, sustained large budget deficits can lead to negative macroeconomic outcomes such as inflation and a dependence on foreign financial investment.