If the Crowding-Out Effect Is Large,then When Government Spending Increases

question 61

Multiple Choice

If the crowding-out effect is large,then when government spending increases

• A)national income will not increase by much.
• B)investment will not increase by much.
• C)the multiplier will be large.
• D)taxes will automatically increase too.

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Definitions:

Fast-Food Restaurants

Fast-food restaurants are eateries that offer quick service and a menu of food items that are prepared and served quickly to the customer, typically at lower cost.

Coase Theorem

A principle asserting that if property rights are well-defined and transaction costs are low, parties will negotiate to correct externalities and allocation resources efficiently, regardless of who holds the rights.

Externalities

Economic side effects or consequences of commercial activities that affect other parties without being reflected in the costs of the goods or services involved.

Negative Externality

A description of a situation where individual or corporate actions result in harmful effects on third parties or the environment, not compensated by the price of transactions.