What Impact Does a Larger Crowding-Out Effect Have on the Magnitude

question 120

Multiple Choice

What impact does a larger crowding-out effect have on the magnitude of a given fiscal policy's effect on interest rates and investment?

• A)It decreases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effect on investment.
• B)It increases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effect on investment.
• C)It decreases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effect on investment.
• D)It increases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effect on investment.

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Definitions:

Mutual Ownership

A form of ownership where an organization is owned by its members or customers, often seen in cooperative businesses or mutual insurance companies.

Consolidation

The process of combining the financial statements of separate companies, subsidiaries, or divisions, into single financial statements that represent the total assets, liabilities, equity, income, expenses, and cash flows of the parent company.

Ownership Interest

A share or stake in an entity that gives the holder a claim on part of the entity's assets and profits.

Treasury Stock Approach

A method used in calculating the share price impact of stock options by assuming that any proceeds from option exercises are used to buy back shares at the current price.