A Practical Implication of the Crowding-Out Effect Is That It

question 12

Multiple Choice

A practical implication of the crowding-out effect is that it

• A) makes contractionary fiscal policy more effective than expansionary fiscal policy.
• B) argues for a larger role of the government in fighting recessions.
• C) makes expansionary fiscal policy less effective.
• D) increases the size of the spending multiplier.

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Definitions:

Leased Lathe

A contract arrangement where a lathe, a machine tool used for shaping metal or wood, is rented for use over a specific time period.

Credit-Approved Customers

Customers who have been evaluated and approved by a company to receive goods or services before payment, based on their creditworthiness.

Straight-Line Depreciation

Straight-line depreciation is a method of allocating the cost of a tangible asset over its useful life in equal installments.

Present Value Interest Factors

A factor used to calculate the present value of a single future payment or a series of future payments, based on a specific interest rate and time period.