If Crowding Out Occurs

question 245

Multiple Choice

If crowding out occurs:

• A) increases in consumption are offset by decreases in government spending.
• B) increases in the money supply are offset by dollar outflows in foreign trade.
• C) increases in government spending cause higher interest rates and decreased investment spending.
• D) decreases in government spending cause lower interest rates and decreased investment spending.

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Definitions:

Yield To Maturity

The total return expected on a bond if held until it matures, including all interest and principal repayments.

Semiannually

Occurring twice a year or every six months.

Present Value

The current assessment of a future cash sum or cash flow streams, discounted at a defined rate of return.

Coupon

The interest payment made to bondholders, typically expressed as an annual percentage of the bond's face value.