Crowding Out

question 85

Multiple Choice

Crowding out:

• A)increases the multiplier effect, so that an increase in government spending raises income by more.
• B)increases the multiplier effect, so that an increase in government spending raises income by less.
• C)decreases the multiplier effect, so that an increase in government spending raises income by more.
• D)decreases the multiplier effect, so that an increase in government spending raises income by less.

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Definitions:

Consumer Surplus

The imbalance between what consumers are willing and financially able to invest in a good or service against what they really spend.

Total Surplus

The sum of consumer surplus and producer surplus in a market, measuring the total net benefit to society from the production and consumption of a good or service.

Free-Trade Policy

Economic policies that eliminate tariffs and trade barriers between countries to encourage trade and economic integration.

Import Quota

A government-imposed restriction on the quantity of a specific good that can be imported into a country.