Complete Crowding Out Implies That as Government Increases Purchases by $1

question 97

Multiple Choice

Complete crowding out implies that as government increases purchases by $1,

• A) private spending decreases by $1.
• B) Real GDP remains unchanged.
• C) there is an equal offsetting decrease in one or more of the components of private expenditures.
• D) all of the above
• E) none of the above

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Definitions:

Incremental Revenue

Additional income generated from a new action or decision, beyond what would have been achieved without it.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Real-options Analysis

A financial modeling technique for valuing flexibility and decision-making in investment under uncertainty.

Incremental Analysis

The examination of the additional costs and benefits of certain decisions, focusing on the changes that would occur from choosing one alternative over another.