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

question 12

Multiple Choice

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

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

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Definitions:

Direct Materials

Raw materials that are directly traced and integral to the finished product.

Direct Labour

The labor costs directly associated with the manufacture of specific goods or services.

Variable Manufacturing Overhead

Indirect, fluctuating costs involved in the production process, such as utilities and maintenance, that are not directly tied to specific units produced.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not vary with the level of production, such as factory rent, salaries of permanent staff, and depreciation of factory equipment.