Suppose the federal government wishes to purchase goods and services valued at $200 billion today and finances these expenditures by raising taxes. According to some economists, this will lead to ▼ a lower a higher level of national consumption and ▼ a lower a higher level of national savings than if the expenditure had been financed by selling bonds left parenthesis borrowing right parenthesis. If the economy is operating at full employment and the federal government increases its borrowing, A. aggregate expenditures and real GDP will rise more rapidly. B. taxes will be raised immediately. C. the tax burden on future generations will be lessened. D. investment will be crowded out.

lower national consumption, higher national saving;

D, investment will be crowded out.

Explanation:

If the Federal government is to purchase goods and services and taxes are to be used to finance the purchase, this can economically mean that the government will have to save more of the taxes collected and reduce how much it spends. This will mean that the government is not going to borrow funds to finance the purchase which is another option.

On the other hand, if the government was running at full employment and then increases its borrowing, it means that one or more sectors of the market economy will be affected due to the government's increased interference in another sector as it tries to raise funds for the purchase of goods and services. This also means that private investments will thin out to the barest minimum.

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