Hoe Do the Multiplier Effect and the Crowding-Out Effect Change

question 178

Multiple Choice

Hoe do the multiplier effect and the crowding-out effect change the consequences of an increase in government spending?

• A)They both amplify the consequences.
• B)They both diminish the consequences.
• C)The multiplier effect diminishes the consequences, while the crowding-out effect amplifies the consequences.
• D)The multiplier effect amplifies the consequences, while the crowding-out effect diminishes the consequences.

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Definitions:

Deferred Tax Asset

An accounting term for items that reduce future tax liability because of temporary differences between the book value and the tax value of assets and liabilities.

Future Taxable Income

The income that a company or individual expects to earn in future periods that will be subject to tax.

Probability

A measure of the likelihood of a specific event happening, expressed as a number between 0 and 1.

Deferred Income Taxes

Taxes applicable to income that is booked but not yet paid, reflecting the timing difference in recognizing income for accounting and tax purposes.