If Counter-Cyclical Fiscal Policy Causes Crowding-Out,which of the Following Statements

question 33

Multiple Choice

If counter-cyclical fiscal policy causes crowding-out,which of the following statements is correct?

• A)Crowding-out increases the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending.
• B)Crowding-out reduces the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending.
• C)Crowding-out reduces the effectiveness of fiscal policy by lowering interest rates and reducing investment spending.
• D)Crowding-out enhances the effectiveness of fiscal policy by lowering interest rates and increasing investment spending.
• E)Crowding-out reduces money demand and thereby reduces the effectiveness of fiscal policy.

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Definitions:

Work In Process

A category of inventory for items that are currently being manufactured but are not yet complete.

Finished Goods Inventory

Refers to the stock of completed products that are ready to be sold but have not yet been sold.

Merchandising Firm

A business entity that purchases goods in their completed form and sells them to customers without further processing or manufacturing.

Raw Materials Inventory

Raw materials inventory represents the cost of materials that are in stock but have not yet been processed into finished goods.