The Crowding-Out Effect Is Caused by

question 6

Multiple Choice

The crowding-out effect is caused by

• A) an increase in the money supply increases the demand for goods and services, and thus crowds out investment.
• B) an increase in government purchases reduces the demand for goods and services, and thus crowds out investment.
• C) an increase in consumer income increases the demand for goods and services, and thus crowds out investment.
• D) an increase in government purchases increases the demand for goods and services, and thus crowds out investment.

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Definitions:

Input Market

Markets where firms purchase resources and services needed for the production process, such as labor, raw materials, and machinery.

Labor Union

An organization of workers formed to protect and further their rights and interests through collective bargaining.

National Labor Relations (Wagner) Act

A 1935 United States federal law that protects the rights of employees to organize, form unions, and engage in collective bargaining, while prohibiting certain unfair labor practices.

Coercion or Interference

Actions or practices that force or unduly influence someone to act in a way that they would not otherwise choose.