The Risk of Crowding Out Is Greater the Closer the Economy

question 64

True/False

The risk of crowding out is greater the closer the economy is to full employment.
If the economy were operating at full employment,crowding out would be inevitable.At full employment,we would be on the production possibilities curve,using all available resources.Therefore,additional government purchases can occur only if private sector purchases are reduced.In real terms,crowding out implies less private sector output.If the economy is in recession,it is possible to get more public sector output (like highways,schools,or defense)without cutbacks in private sector output.

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Definitions:

Lose/Lose

A conflict resolution or situation outcome where all parties involved suffer losses or negative consequences.

Conflict Management

The practice of identifying and addressing disagreements in a constructive manner to resolve disputes and improve relationships.

Negotiating Position

The stance or condition individuals or parties enter into negotiations with, embodying their initial demands, goals, and conditions.

Alternatives

Different options or choices available in a situation, allowing for a selection among various possible outcomes or actions.