The Crowding-Out Effect Suggests That

question 181

Multiple Choice

The crowding-out effect suggests that

• A)tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
• B)government borrowing to finance the public debt increases the real interest rate and reduces private investment.
• C)it is very difficult to have excessive aggregate spending in a capitalist economy.
• D)consumer and investment spending always vary inversely.

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Definitions:

Antitrust Law

Laws designed to prevent anti-competitive practices, monopolies, and to promote fair competition for the benefit of consumers.

Remedies

Measures or actions taken to solve a problem, correct a fault, or improve a situation.

Fines

Monetary penalties imposed by an authority as punishment for violations of legal or regulatory standards.

Congress

The national legislative body of a country, particularly in the United States, responsible for making laws and comprising two houses: the Senate and the House of Representatives.