In the Mainstream View, the Crowding-Out Effect from the Use

question 18

Multiple Choice

In the mainstream view, the crowding-out effect from the use of fiscal policy is

• A) small, especially during a recession.
• B) large, especially during a recession.
• C) large because the velocity of money is high.
• D) small because the velocity of money is low.

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Definitions:

Callable Bond

A callable bond is a financial instrument that allows the issuer to pay off the bond prior to its due date.

Call Provision

A clause in a bond or other fixed-income security that allows the issuer to repurchase and retire the debt before its maturity date.

Coupon Rate

The interest rate stated on a bond, which is the percentage of the bond's face value that is paid out annually as interest to the bondholder.

Yield to Maturity

The total return anticipated on a bond if held until it matures, including all coupon payments and the return of the principal amount.