Which Policy to Finance the Public Debt Might Crowd-Out Private

question 13

Multiple Choice

Which policy to finance the public debt might crowd-out private spending?

• A)borrowing money from the public in the money market
• B)decreasing government spending
• C)creating new money
• D)decreasing taxes

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Definitions:

Monthly Compounding

The process wherein the interest earned on an investment is added to the principal sum every month, and from then on, the interest for future periods is calculated on the new total.

Effective Annual Rate

The effective annual rate is the actual return on an investment after accounting for compounding interest over a one-year period.

Nominal Annual Rate

The interest rate stated on a loan or investment agreement, not adjusted for inflation or other factors that affect real value.

Compounded Monthly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, done monthly.