If the Government Has a Budget Deficit, Crowding Out Might

question 200

Multiple Choice

If the government has a budget deficit, crowding out might occur. Crowding out leads to all of the following EXCEPT

• A) a higher real interest rate.
• B) a decreased quantity of investment.
• C) a smaller capital stock in the future.
• D) decreased private saving.

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Definitions:

Operating Net Cash Flow

The amount of cash generated by a company’s normal business operations over a specific period.

Profitable New Plant

A profitable new plant refers to a newly established manufacturing or production facility that generates earnings in excess of its operating and capital costs.

Long-Term Debt

A type of loan or borrowing that is due for repayment in more than one year.

Tax System

A tax system is the structured framework within which taxes are imposed on individuals, corporations, goods, and services by a government entity.