Which Term Refers to the Reduction in Demand That Results

question 94

Multiple Choice

Which term refers to the reduction in demand that results when a fiscal expansion raises the interest rate?

• A) multiplier effect
• B) crowding-out effect
• C) accelerator effect
• D) catch-up effect

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Definitions:

Legal Obligation

A duty enforced by law that requires an entity or individual to perform or refrain from certain actions.

Protective Covenants

Provisions or clauses in a debt agreement that limit certain actions of the borrower to protect the lenders' interests.

Indirect Bankruptcy Costs

Expenses that are not directly tied to the bankruptcy filing process but arise as a result of the company's financial distress, such as lost sales or reduced creditworthiness.

Financial Distress

A scenario in which a business is unable or struggles to fulfill its financial commitments to its lenders.