Refer to the Above Graph

question 139

Multiple Choice

Refer to the above graph. The economy is initially at point 1. Which of the following events would cause a shift that would help offset the crowding-out effect? An increase in:

• A) Interest rates caused by a change in Federal Reserve policy
• B) Profit expectations resulting from an increase in government spending
• C) Business taxes levied by government to pay for new government programs
• D) The degree of excess capacity in business stemming from a recession

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Definitions:

Firm

An organization or business entity engaged in commercial, industrial, or professional activities.

Quantity

The amount or number of a material or immaterial entity.

Point

In economics, it often refers to a specific value or level on a graph, such as on a demand curve or supply curve.

Competitive Market Process

The dynamic system in which businesses compete to offer goods and services to consumers, driven by the forces of supply and demand, leading to innovations and efficiencies.