Which of the Following Provides an Example of "Crowding Out

question 2

Multiple Choice

Which of the following provides an example of "crowding out"?

• A) Increases in government purchases cause more government borrowing, which decreases the funds that are available for private investors to borrow in the loanable funds markets.
• B) Increases in the interest rate cause people to spend more.
• C) Increases in the money supply lead to higher spending, which crowds out unemployment.
• D) Decreases in taxes cause the government to borrow more, which reduces interest rates in the loanable funds markets.

---

Definitions:

Output

The quantity of goods or services produced within a given time period.

Profit-Maximizing Rule

The principle that firms maximize profit by producing at the level where marginal revenue equals marginal cost.

MC = MR

A condition where a firm's marginal cost (MC) of producing an additional unit is equal to its marginal revenue (MR) from selling that unit, often used to determine the profit-maximizing level of production.

Costs Of Production

Costs of production refer to the total expenses incurred in the manufacturing of a product, including raw materials, labor, and overhead.