Which of the Following Is an Example of Crowding Out

question 124

Multiple Choice

Which of the following is an example of crowding out?

• A) A decrease in the rate of growth of the stock of money decreases GDP.
• B) A deficit causes an increase in interest rates, which causes a decrease in investment spending.
• C) An increase in tariffs causes a decrease in imports.
• D) A decrease in government housing subsidies causes an increase in private spending on housing.

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Definitions:

Marginal Revenue

The additional revenue that a company receives from selling one more unit of a good or service.

Output Effect

The impact on total production and revenue when a firm alters the quantity of output produced, holding other factors constant.

Monopolist's Profit

The excess earnings a monopolist achieves due to the lack of competition, allowing for pricing above marginal cost.

Maximize Profit

The process or strategy of adjusting the production and sales operations of a company to generate the highest possible return or profit.