If a Federal Budget Deficit Causes Crowding Out, _____

question 5

Multiple Choice

If a federal budget deficit causes crowding out, _____

• A) real GDP does not increase by as much as the spending multiplier would predict, because the marginal propensity to consume decreases.
• B) real GDP does not increase by as much as the spending multiplier would predict, because investment decreases.
• C) interest rates fall, reducing the burden of the national debt.
• D) firms become more willing to invest.
• E) interest rates fall, so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit.

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Definitions:

Enmeshment

A term used in psychology to describe relationships where personal boundaries are permeable and unclear, leading to overly close and entangled relationships.

Disengagement

The process of detaching or withdrawing from involvement in a particular activity, situation, or group.

Positive Feedback

Encouraging comments or actions that affirm someone's behavior or performance, often motivating continued or improved effort.

Negative Feedback

A type of constructive criticism that points out what was done wrong or what needs improvement, which can be essential for progress.