Increased government debt can lead to higher interest rates and, as a result, crowding out of private investment spending. in terms of borrowing (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the economy? a. debt-spending on education. b. debt-spending on research and development. c. debt-spending on highways and ports. d. all of the above.

The correct answer is option D.

Explanation:

Increase in government spending may not lead to an expansionary effect on the economy because of the crowding-out effect. This is because increased borrowing to fund spending leads to increase in interest rates. Increased interest rate discourages investors leading to a decline in private investment. This further has an adverse effect on aggregate demand.  

If the debt spending is spent on constructive work such as infrastructure, research, and development, education, etc it will create value in the future. Such spending will pose less problem in the long run. Spending on education will create human capital. Spending on infrastructure and research and development will further help in the production process.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: