Complete Crowding Out Implies That as Government Increases Purchases by $1

question 97

Multiple Choice

Complete crowding out implies that as government increases purchases by $1,

• A) private spending decreases by $1.
• B) Real GDP remains unchanged.
• C) there is an equal offsetting decrease in one or more of the components of private expenditures.
• D) all of the above
• E) none of the above

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Definitions:

Pluralistic Ignorance

A social psychological phenomenon where a majority of group members privately reject a norm, but assume incorrectly that most others accept it.

False Uniqueness Effect

The cognitive bias causing individuals to underestimate the commonality of their desirable traits or behaviors, believing they are more unique than they actually are.

Ethical Issues

Situations or problems requiring individuals or organizations to choose between actions that must be evaluated as right or wrong based on moral principles.

Unintended Negative Consequences

Outcomes that are not foreseen or intended and have a harmful or undesirable effect on individuals or communities.