The Term Crowding-Out Effect Refers to

question 48

Multiple Choice

The term crowding-out effect refers to

• A)the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease.
• B)the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease.
• C)the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase.
• D)the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.

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Definitions:

Depreciation Expense

Distributing the expense of a physical asset throughout its lifespan.

Cost of Goods Sold

The total cost of manufacturing or acquiring the products that were sold during a given period.

Operating Expenses

Expenses incurred in the course of regular business operations, such as wages, rent, and utilities.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing the owners' share.