The Crowding-Out Effect Refers to the Possibility That an

question 57

Multiple Choice

The crowding-out effect refers to the possibility that an

• A) increase in the money supply will result in a decline in taxes.
• B) increase in consumption spending will crowd out government spending.
• C) increase in private savings will crowd out the taxable income of households.
• D) increase in government borrowing will result in higher interest rates, which will crowd out private investment and consumption.

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Definitions:

Present Values

The current value of a future sum of money or stream of cash flows given a specified rate of return.

Annuities

Financial products that provide a series of payments at regular intervals, often used as an income stream for retirees.

Present Values

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Compounded Annually

Refers to the calculation of interest where the amount is added to the principal at the end of each year, affecting the total interest over time.