If Crowding Out Occurs

question 245

Multiple Choice

If crowding out occurs:

• A) increases in consumption are offset by decreases in government spending.
• B) increases in the money supply are offset by dollar outflows in foreign trade.
• C) increases in government spending cause higher interest rates and decreased investment spending.
• D) decreases in government spending cause lower interest rates and decreased investment spending.

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Definitions:

Proportional

Corresponding in size, degree, or intensity; having a constant relation in degree or number between the parts.

Sales Taxes

Taxes imposed by governmental entities on sales of goods and services, typically collected at the point of sale from the consumer.

Regressive

Referring to a tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower-income earners.

Progressive

Pertaining to political, social, or economic beliefs favoring or promoting changes, reforms, or innovations.