A Smaller Crowding-Out Effect

question 60

Multiple Choice

A smaller crowding-out effect:

• A)increases the magnitude of a given fiscal policy's effect on AD and increases the magnitude of its effects on net exports.
• B)increases the magnitude of a given fiscal policy's effect on AD and decreases the magnitude of its effects on net exports.
• C)decreases the magnitude of a given fiscal policy's effect on AD and increases the magnitude of its effects on net exports.
• D)decreases the magnitude of a given fiscal policy's effect on AD and decreases the magnitude of its effects on net exports.

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Definitions:

Price Ratio

The relative price of one good or service compared to another, often indicating how many units of one good can be exchanged for one unit of another.

Price

The monetary value anticipated, needed, or dispensed for acquiring something.

Utility Increases

A situation where the satisfaction or benefit derived from consuming goods or services rises.

Diminishing Marginal Utility

The principle that as more of a good or service is consumed, the additional satisfaction or utility gained from consuming an additional unit decreases.