Which of the Following Is Not an Example of Crowding

question 11

Multiple Choice

Which of the following is not an example of crowding out?

• A) Government purchases rise,the budget deficit rises,the federal government's demand for loanable funds rises,the interest rate rises,and investment falls.
• B) Government spends more on X,prompting individuals to spend less on X.
• C) Taxes decline,the budget deficit rises,the federal government's demand for loanable funds rises,the interest rate rises,the demand rises for U.S.dollars,the dollar appreciates,and net exports decline.
• D) Business firms spend more on X,prompting households to spend less on Y.
• E) none of the above

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Definitions:

Present Value Index

A calculation that compares the present value of net cash inflows to the initial investment, used to evaluate the profitability of an investment.

Computed

Refers to something that has been determined or calculated using a computer or calculator.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculated by discounting the expected future cash flows to their present values and subtracting the initial investment.

Present Value

The immediate value of a future amount of money or a series of payments, discounted at a given rate of return.