Which Would Tend to Reduce the Crowding-Out Effect That Occurs

question 11

Multiple Choice

Which would tend to reduce the crowding-out effect that occurs when the federal government increases its borrowing to finance a deficit?

• A) The economy is operating at full employment.
• B) The economy is operating at less than full employment.
• C) The expenditures fail to contribute to the development of human capital.
• D) The deficit financing reduces the profit expectations of business firms.

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Definitions:

Real Account

Permanent accounts in accounting that are not closed at the end of the accounting period, including assets, liabilities, and equity accounts.

Nominal Account

Refers to accounts that track revenues, expenses, gains, and losses; these accounts are closed at the end of each accounting period.

Ledger Accounts

These are individual accounts in accounting that record transactions related to a company's assets, liabilities, equity, revenue, and expenses in a double-entry bookkeeping system.

Net Income

Represents the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenues.