The Strict Crowding-Out Argument Relies on the Assumption That

question 96

Multiple Choice

The strict crowding-out argument relies on the assumption that

• A)the government must raise taxes to pay for spending, and the tax increase crowds out the stimulative effect of increased spending.
• B)the total flow of saving is a fixed amount.
• C)investment is invariant to interest rates, but very dependent on aggregate spending.
• D)consumption will rise to absorb most of an increase in income, and investment will accordingly fall.

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Definitions:

Legal Markets

Markets where the trading of goods and services takes place within the framework of laws and regulations established by a government.

Reliability

The degree to which an assessment tool or measurement consistently produces stable and accurate results across different occasions.

Black Markets

Illicit trade practices where goods or services are exchanged illegally, bypassing governmental regulations or price controls.

Legal Markets

Markets operating within the framework of regulatory laws and norms, where transactions of goods and services occur legally.