When the Economy Is Producing Its Potential Output, an Increase

question 68

Multiple Choice

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called

• A) fiscal policy.
• B) crowding out.
• C) the multiplier effect.
• D) entitlement spending.

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Definitions:

Tax Management

The process of analyzing financial situations or decisions from a tax perspective with the aim to minimize tax liability.

Financial Accounting

Financial accounting refers to the process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement, and cash flow statement, that record the company's operating performance over a specific period.

Financial Management

The strategic planning, organizing, directing, and controlling of financial undertakings in an organization or an institute.

Share Outstanding

The total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares.