The Crowding-Out Effect Implies That a Government Budget Deficit ________

question 60

Multiple Choice

The crowding-out effect implies that a government budget deficit ________ the demand for loanable funds and ________ equilibrium investment.

• A) does not change; does not change
• B) increases; decreases
• C) increases; increases
• D) decreases; decreases
• E) decreases; increases

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Definitions:

Lower Opportunity Cost

The advantage of choosing an option that has a relatively smaller loss of potential gain from other alternatives.

Trade

The exchange of goods and services between people or entities, often involving the transfer of money.

Goods

Tangible products that satisfy human wants and provide utility, which people buy and use.

Prices

The cost of acquiring a product or service, influenced by elements like market supply and consumer demand.