The Crowding Out Effect of Expansionary Fiscal Policy Refers to Which

question 38

Multiple Choice

The crowding out effect of expansionary fiscal policy refers to which of the following?

• A)a reduction in private sector planned investment
• B)a reduction in the stock of inventories
• C)the reduction in the size of the budget deficit
• D)the reduction in the size of the recessionary gap

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Definitions:

Workers

Individuals engaged in physical or mental effort aimed at producing goods or providing services in exchange for wages.

Perfect Competitor

A market structure where many firms offer products or services that are similar, allowing for free entry and exit, and no single firm can influence the market price.

Imperfect Competitor

An entity in a market that does not hold enough power to dictate the conditions of the market but can influence the price and output of its goods to some extent.

MRP

Marginal Revenue Product, the additional revenue generated from employing one more unit of a factor of production.