Which of the Following Correctly Explains the Crowding-Out Effect

question 169

Multiple Choice

Which of the following correctly explains the crowding-out effect?

• A)An increase in government expenditures decreases the interest rate and so increases investment spending.
• B)An increase in government expenditures increases the interest rate and so reduces investment spending.
• C)A decrease in government expenditures increases the interest rate and so increases investment spending.
• D)A decrease in government expenditures decreases the interest rate and so reduces investment spending.

---

Definitions:

Kin Selection Theory

A theory in evolutionary biology that predicts organisms will behave altruistically towards their relatives to increase the chances of their genetic traits being passed on to future generations.

Cooperative Hunting

The action of different individuals or species working together to hunt prey, increasing their success rate compared to solo efforts.

Altruism

Behavior of an individual that benefits another at its own cost; in biology, it is often discussed in the context of evolutionary theory and social animals.

Prisoner's Dilemma

A fundamental problem in game theory showing why two individuals might not cooperate, even if it is in both their best interests to do so.