The Crowding-Out Effect of Expansionary Fiscal Policy Suggests That

question 166

Multiple Choice

The crowding-out effect of expansionary fiscal policy suggests that

• A)tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
• B)increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
• C)it is very difficult to have excessive aggregate spending in the U.S.economy.
• D)consumer and investment spending always vary inversely.

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Definitions:

Payroll Tax Expense

Taxes that an employer is responsible for paying on behalf of its employees, which can include federal and state income taxes, Social Security, and Medicare taxes.

FICA Taxes Payable

The amount due for Federal Insurance Contributions Act taxes, which fund Social Security and Medicare, required to be paid by employers and employees.

Interstate Commerce

Refers to any work involving or related to the movement of goods or services across state lines within the United States.

Worker's Regular Hourly Wage

The standard rate of pay per hour for a worker before any overtime or bonuses are added.