Which of the Following Sequences Best Represents the Crowding-Out Effect

question 26

Multiple Choice

Which of the following sequences best represents the crowding-out effect?

• A)government purchases ↑ ⇒ GDP ↑ ⇒ supply of money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
• B)government purchases ↓ ⇒ GDP ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↓
• C)government purchases ↑ ⇒ GDP ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
• D)taxes ↑ ⇒ GDP ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓

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Definitions:

Deformation

The process by which rocks change shape or position due to stress, heat, or pressure without breaking.

Subsidence

The gradual sinking of land or a structure, often due to underground material movement or removal of fluids from the soil.

Uplift

A geological process where Earth's crust is raised or elevated, often as a result of tectonic activity.

Isostasy

The equilibrium state of the Earth’s crust, where the forces pushing a land mass up are balanced by the weight of the mass itself pressing down.