Which Would Tend to Reduce the Crowding-Out Effect That Occurs

question 233

Multiple Choice

Which would tend to reduce the crowding-out effect that occurs when the Federal government increases its borrowing to finance a deficit?

• A)The economy is operating at full employment.
• B)The economy is operating at less than full employment.
• C)The expenditures fail to contribute to the development of human capital.
• D)The deficit financing reduces the profit expectations of business firms.

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Definitions:

Incentives

Financial or non-financial rewards offered to encourage specific behaviors or outcomes, often used to motivate individuals or businesses to perform optimally.

State Tax

A financial charge or levy imposed by a state government on income, property, or sales.

Marginal Cost

The added financial burden from producing one more unit of a product or service.

Marginal Revenue

The surplus revenue earned from the sale of an extra unit of a product or service.