The Crowding-Out Effect Stresses That

question 113

Multiple Choice

The crowding-out effect stresses that

• A) an increase in government expenditures will stimulate aggregate demand and, thereby, help to prevent recessions.
• B) an increase in taxes will restrain aggregate demand and, thereby, help to control inflation.
• C) additional government borrowing to finance a larger deficit will increase the demand for loanable funds, causing real interest rates to rise.
• D) a budget deficit is a highly effective tool with which to combat recessions.
• E) both a and d are correct.

---

Definitions:

Transportation Infrastructure

The foundational facilities and systems serving a country, city, or area, including roads, bridges, tunnels, railways, and ports, used for the movement of people and goods.

Investment Decisions

The process of making choices about where to allocate resources in order to generate the highest possible returns.

Carrier

A carrier is an entity that undertakes the transportation of goods or passengers from one place to another, including airlines, shipping lines, and trucking companies.

Fastest Delivery

Refers to the logistic and supply chain capability to deliver products or services to customers in the shortest possible time.