If a Federal Budget Deficit Causes Crowding Out

question 128

Multiple Choice

If a federal budget deficit causes crowding out,

• A)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because bondholders' saving declines
• B)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment declines
• C)interest rates fall,reducing the burden of the debt
• D)interest rates fall,bringing the current deficit back down
• E)interest rates fall,so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit

---

Definitions:

Untreated Population

A group in a study or an experiment that does not receive the treatment or intervention being tested.

Significance Level

The threshold in hypothesis testing that determines the probability of rejecting the null hypothesis when it is actually true, often denoted by alpha.

Treatment Group

In experimental research, a group of subjects who receive the treatment or intervention under study.

Placebo Group

A control group in an experiment that receives an inert treatment or substance (placebo) to compare against the effects of the active treatment on the experimental group.