The Crowding-Out Effect Suggests That

question 52

Multiple Choice

The crowding-out effect suggests that:

• A)increases in consumption are always at the expense of saving.
• B)increases in government spending will close a recessionary gap.
• C)increases in government spending may raise the interest rate and thereby reduce investment.
• D)high taxes reduce both consumption and saving.

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Definitions:

Current Ratio

The Current Ratio is a liquidity metric that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Notes Payable

Financial obligations represented by formal written agreements to pay a specific sum of money at a future date.

Pro Forma Statement

Financial statements prepared under hypothetical scenarios or assumptions to forecast future financial performance.

Fixed Assets

are long-term tangible assets used in the operation of a business, such as buildings, machinery, and equipment, not expected to be converted into cash within a year.