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:

Utilization

The measure of how efficiently resources, such as labor, equipment, and capacity, are being used in the production or service delivery process.

Break-even Point

The level of production or volume of sales at which total revenues equal total expenses, resulting in no net profit or loss.

Variable Cost

Costs that vary directly with the level of output or production, such as materials and labor.

EMV

Expected Monetary Value, a concept in decision making and risk management that calculates the average outcome when the future includes scenarios that may or may not happen.