Which Statement Best Explains the Crowding-Out Effect

question 87

Multiple Choice

Which statement best explains the crowding-out effect?

• A) An increase in government expenditures decreases the interest rate and so increases investment spending.
• B) An increase in government expenditures increases the interest rate and so reduces investment spending.
• C) A decrease in government expenditures increases the interest rate and so increases investment spending.
• D) A decrease in government expenditures decreases the interest rate and so reduces investment spending.

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Definitions:

Negligence

The failure to exercise the care that a reasonably prudent person would under similar circumstances, resulting in unintended harm to others.

Partner's Liability

The legal responsibility held by partners in a partnership to cover the business's debts and other financial obligations.

Partnership Agreement

A contract between partners in a partnership which outlines the terms and conditions of the relationship between the partners.

Judgment

A formal decision or order given by a court that resolves a legal dispute between parties and may involve the awarding of damages or the imposition of sanctions.