The Crowding-Out Effect Suggests That

question 99

Multiple Choice

The crowding-out effect suggests that

• A) restrictive fiscal policy is an effective weapon against inflation.
• B) expansionary fiscal policy will be a highly effective weapon for fighting a recessionary downturn
• C) a budget surplus will cause the demand for loanable funds to decline, interest rates to rise, and aggregate demand to decrease.
• D) budget deficits that lead to higher interest rates reduce private investment spending.

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Definitions:

Vocational School

An educational institution that provides practical and skills-based training for specific careers or trades.

Budgets

Financial plans outlining expected revenues and expenditures for a specific period.

Activity Variances

Differences between planned activity costs and the actual costs incurred for those activities.

Cost Drivers

Factors that cause the cost of an activity or operation to increase or decrease, such as machine hours, labor hours, or the volume of production.