Crowding Out

question 233

Multiple Choice

Crowding out:

• A) is the decrease in private spending that occurs when government spending increases.
• B) occurs when people see that lower taxes today means higher taxes in the future,so they quickly spend the tax cut.
• C) is federal government policy on taxes,spending,and borrowing that is designed to influence business fluctuations.
• D) is central bank policy on the monetary base,interest rates,and bank reserves that is designed to influence business fluctuations.

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Definitions:

Price Elasticity

An indicator of the sensitivity of the demand for a product to variations in its price.

Elasticity of Demand

A measure of how the quantity demanded of a good or service responds to a change in its price, indicating the sensitivity of consumers to price changes.

Percentage Change

A mathematical calculation that indicates how much a number has increased or decreased in percentage terms relative to its previous value.

Price Elastic

Describes how sensitive demand for a product or service is to changes in its price; high elasticity indicates significant demand change with price fluctuations.