The Crowding-Out Effect Suggests That

question 73

Multiple Choice

The crowding-out effect suggests that

• A) expansionary fiscal policy causes inflation.
• B) restrictive fiscal policy is an effective weapon against inflation.
• C) a reduction in private spending that results from higher interest rates caused by a budget deficit will largely offset the expansionary effects of the deficit.
• D) a tax reduction financed by borrowing will increase the disposable income of households and, thereby, lead to a strong expansion in aggregate demand, output, and employment.

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Definitions:

Molding Department

A specific section within a manufacturing facility dedicated to the process of shaping materials using rigid frames or models called molds.

Conversion Costs

The combined costs of direct labor and manufacturing overheads, which are incurred to convert raw materials into finished products.

Equivalent Units

A concept used in process costing that converts partially completed goods into a number of fully completed units.

Weighted-Average Method

A method of inventory valuation that assigns a cost to inventory on the basis of the average cost of all similar items in the inventory.