The Crowding Out Effect Is Often Associated with

question 193

Multiple Choice

The crowding out effect is often associated with

• A)a temporary increase in taxes.
• B)an increase in the interest rate caused by government borrowing.
• C)the reinforcing impact of state and local tax changes on federal tax changes.
• D)the impact of a tax rate increase when the aggregate supply function is horizontal.

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Definitions:

Creative Federalism

A form of federalism prevalent in the 1960s where the federal government determined the needs of the states and provided services, often leading to an expansion of federal government powers.

Federal Grants

Financial aid or resources provided by the federal government to states, organizations, or individuals for specific projects or purposes.

Block Grant

A grant from a central government that a local authority can allocate to a wide range of services.

Categorical Grant

A type of federal aid given to state and local governments with strict limitations on how the money can be spent, usually tied to specific programs or projects.