The Crowding-Out Effect Refers to the Tendency of Expansionary Fiscal

question 92

Multiple Choice

The crowding-out effect refers to the tendency of expansionary fiscal policy to

• A)cause decreases in planned investment or planned consumption in the private sector.
• B)cause households to save less.
• C)replace low skilled labour with higher skilled labour.
• D)cause firms to produce beyond capacity.

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Definitions:

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost over the useful life of the asset.

Gross Profit Rate

A financial metric that represents the percentage of revenue that exceeds the cost of goods sold.

Perpetual Inventory Method

A system of inventory management where updates are made continuously to account for additions to and subtractions from inventory, showing real-time inventory levels.

Partial Equity Method

An accounting method used when an investing entity holds a significant but not controlling interest in another entity, recording the investment at cost and recognizing a proportionate share of the investee's earnings.