A Concern About Crowding Out Caused by Increased Government Borrowing

question 42

Multiple Choice

A concern about crowding out caused by increased government borrowing is that:

• A) interest rates on private borrowing fall.
• B) lower rates of economic growth can result from a decline in business investment spending.
• C) the federal government may default on its loans.
• D) foreign lenders find it less attractive to help finance federal deficits.

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Definitions:

Working Capital

The gap between a firm's present assets and liabilities, showing how liquid it is in the short run.

Investment Project

An investment project represents a series of cash inflows and outflows aimed at generating a return over time, typically involving the purchase of assets or investment in ventures.

Discount Rate

In DCF evaluations, the applied rate to ascertain the contemporary value of expected future cash inflows.

Net Present Value

The difference in now-value of cash inflow versus outflow throughout a definite timeline.