An Increase in Government Spending Will Completely Crowd Out Investment

question 52

Multiple Choice

An increase in government spending will completely crowd out investment if

• A) money supply is increased at the same time.
• B) money demand is not sensitive to the interest rate.
• C) the economy is operating at capacity.
• D) the economy is operating well below capacity.

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Definitions:

Multiple-step Statement

An income statement that separately reports operating and non-operating activities, making it easier to understand the financial results.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, revealing net profit or loss.

Selling Expense

Costs incurred directly related to the sale of a product or service, including advertising, shipping, and sales staff salaries.

Delivery Expense

Costs incurred by a business for the transportation or delivery of goods to customers, often classified as an operating expense.