Both Screening and Signaling

question 103

Multiple Choice

Both screening and signaling:

• A)correct inefficiency in the market.
• B)allow more transactions to take place that are valuable to buyers and sellers.
• C)can increase surplus gained in a market.
• D)All of these are true.

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Definitions:

Exemptions

Provisions in tax law that allow taxpayers to reduce their taxable income, often for specific activities or investments.

Government Borrowing

The method by which a government finances its expenditure by issuing debt instruments, such as bonds.

Public Expenditures

Refers to the spending of government funds on goods, services, and infrastructure for the public benefit and economic stability.

Crowding Out

A situation in which increased public sector borrowing leads to a reduction in private sector spending, either because of higher interest rates or because available financial resources are used by the government.