When Consumption and Investment Is Reduced Because of the Higher

question 77

Multiple Choice

When consumption and investment is reduced because of the higher interest rates induced by the government expansionary fiscal policy,the effect is called

• A)the crowding-in effect.
• B)the crowding-out effect.
• C)the multiplier effect.
• D)the budget effect.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded, typically downward sloping, indicating that demand decreases as price increases.

Plaster

A building material made of lime or gypsum, water, and sand, used for coating walls and ceilings.

Labor

The deployment of human manpower, both in physical form and intellectual capacity, for generating goods and services.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, clearing the market.