The Crowding-Out Effect Suggests That

question 52

Multiple Choice

The crowding-out effect suggests that:

• A)increases in consumption are always at the expense of saving.
• B)increases in government spending will close a recessionary gap.
• C)increases in government spending may raise the interest rate and thereby reduce investment.
• D)high taxes reduce both consumption and saving.

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Definitions:

Economic Performance Approach

An accounting method where income and expenses are recorded when the service is provided or consumed, rather than when payment is made.

Commercial and Tax Law Approach

The study of laws related to commercial transactions and taxation, focusing on how they influence business operations and financial practices.

Auditing Standards

Rules and guidelines that auditors are required to follow when conducting audits of companies’ financial statements, ensuring consistency, reliability, and integrity in the audit process.

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity, including the balance sheet, income statement, and cash flow statement.