Crowding Out Occurs When the Federal Government

question 36

Multiple Choice

Crowding out occurs when the federal government:

• A) raises taxes to finance a budget deficit.
• B) refinances maturing U.S. Treasury bonds.
• C) borrows by selling bonds to finance a deficit.
• D) uses a budget surplus to pay off part of the national debt.

---

Definitions:

Elastic

Describes a situation in which the demand for a product or service significantly changes in response to a change in its price.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.

Excise Tax

A tax imposed on specific goods, services, or transactions, often included in the price of products like tobacco, alcohol, and fuel.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that producers are willing and able to sell.