When the Economy Is Producing Its Potential Output, an Increase

question 68

Multiple Choice

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called

• A) fiscal policy.
• B) crowding out.
• C) the multiplier effect.
• D) entitlement spending.

---

Definitions:

Voters

Individuals who are eligible and participate in an election process to choose representatives or decide on public questions.

Incumbent Governor

The currently serving governor in office, usually in the context of elections to refer to the existing officeholder.

Confidence Level

The percentage or proportion of times that an estimated interval is expected to contain the true value of the parameter.

Interval Estimate

An estimate of a population parameter that specifies a range within which the parameter is estimated to lie.