If Crowding Out Exists, the Expansionary Effect of Government Spending

question 74

Multiple Choice

If crowding out exists, the expansionary effect of government spending will be

• A) smaller than intended.
• B) negative.
• C) infinite.
• D) larger than intended.
• E) unchanged.

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Definitions:

Production

The process of creating goods and services through the combination of labor, capital, and resources.

Division of Labor

The allocation of different tasks to different people or groups in an effort to improve efficiency.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another currency.

Honduras

A country located in Central America, characterized by its rich culture, historical sites, and a diverse landscape that includes mountains, rainforests, and coastal beaches.