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:

Operating Characteristic

A function or curve that describes the discerning capacity of a statistical test, defining the probabilities of accepting a hypothesis over a range of values.

Sample Size

The number of individuals or observations used in a study, affecting its power and the precision of the results.

Type II Error

A statistical error that occurs when a false null hypothesis is not rejected, missing an actual effect or difference.

Sample Size

The number of observations or data points in a statistical sample.