The Crowding-Out Effect Refers to a Situation Where

question 88

Multiple Choice

The crowding-out effect refers to a situation where

• A)an easy fiscal policy reduces interest rate and increases investment.
• B)an easy monetary policy reduces interest rate and increases investment.
• C)an easy fiscal policy increases interest rate and decreases investment.
• D)an easy monetary policy increases interest rate and decreases investment.

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Definitions:

Internal Growth Rate

The rate at which a company can grow its sales and earnings without needing to borrow money or secure additional equity financing.

Profit Margin

A financial metric that measures the amount of profit made on a sale as a percentage of revenue, illustrating efficiency.

Retention Ratio

The retention ratio is a financial metric that measures the proportion of a company's earnings that are not distributed as dividends to shareholders but are instead reinvested in the business.

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.