'Crowding Out' Will Be Smaller If

question 87

Multiple Choice

'Crowding out' will be smaller if:

• A)consumption spending is more sensitive to changes in the interest rate.
• B)equilibrium GDP is further below potential GDP.
• C)investment spending is less sensitive to changes in the interest rate.
• D)the economy is at or above full employment.

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Definitions:

Average Costs

Total costs (fixed and variable) divided by the total quantity of output produced, representing the cost per unit of production on average.

Variable Costs

Costs that change in proportion to the good or service that a business produces.

Shut Down

The cessation of operations, often temporarily, by a business or organization.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent or salaries.