Crowding Out Will Be Greater

question 10

Multiple Choice

Crowding out will be greater

• A)the less sensitive consumption spending is to changes in the interest rate.
• B)the further equilibrium GDP is below potential GDP.
• C)the more sensitive investment spending is to changes in the interest rate.
• D)if the economy is in recession,rather than at full employment.

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Definitions:

Note Receivable

A financial asset representing a written promise to receive a specific amount of money at a future date.

Dishonored Note

A promissory note that has not been paid by the maker at the time of maturity, resulting in default.

Promissory Note

A financial document in which one party promises in writing to pay a determinate sum of money to another, either at a fixed or determinable future time or on demand.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the principal amount.