The Crowding-Out Effect Refers to the Possibility That an

question 57

Multiple Choice

The crowding-out effect refers to the possibility that an

• A) increase in the money supply will result in a decline in taxes.
• B) increase in consumption spending will crowd out government spending.
• C) increase in private savings will crowd out the taxable income of households.
• D) increase in government borrowing will result in higher interest rates, which will crowd out private investment and consumption.

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Definitions:

Well-Diversified Portfolio

An investment portfolio comprising a wide variety of assets to minimize risk through diversification.

Single Index Model

A simplified method to estimate the return of a security or portfolio by relating it to the return of a single market index, using statistical measures.

Portfolio's Sigma

A term referring to the standard deviation of a portfolio, quantifying the portfolio's volatility or risk.

Market Index

A statistical measure that represents the overall performance of a group of stocks, indicating trends in a specific financial market.