Crowding Out Occurs When Expansionary Fiscal Policy Leads to

question 174

Multiple Choice

Crowding out occurs when expansionary fiscal policy leads to

• A) a higher money supply and a reduction in net exports.
• B) a higher money supply and a reduction in the interest rate.
• C) a higher interest rate and a reduction in private investment.
• D) a higher price level and a reduction in the money supply.

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Definitions:

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or to evaluate the attractiveness of an investment.

Net Present Value

A valuation method that calculates the present value of an investment's expected cash flows, minus the initial investment cost.

Diagnostic Computer

A computer system or software used to read and diagnose faults in various systems, often utilized in automotive, computer, and industrial settings.

Cash Inflows

The total amount of money being transferred into a business, typically from operational, investing, and financing activities.