The Crowding-Out Effect Indicates That Budget Deficits

question 24

Multiple Choice

The crowding-out effect indicates that budget deficits

• A) will stimulate aggregate demand and, therefore, exert a strong impact on output and employment.
• B) will lead to additional borrowing and higher interest rates that will reduce the level of private spending.
• C) are highly appropriate when the threat of inflation is present.
• D) are highly appropriate when the threat of recession is present.

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Definitions:

Cooperation

The process of working together toward a common goal, often necessitating compromise and collective effort among individuals or groups.

Communication

The exchange of information or ideas through various channels and methods, including verbal, non-verbal, written, and digital forms.

Custom

A traditional and widely accepted way of behaving or doing something that is specific to a particular society, place, or time.

Strengthen Capitalism

Efforts or actions taken to bolster the efficiency, competitiveness, and innovation within capitalist economic systems.