Which of the Following Is an Example of Crowding Out

question 54

Multiple Choice

Which of the following is an example of crowding out?

• A)An increase in government spending increases interest rates, causing investment to fall.
• B)A decrease in private savings increases interest rates, causing investment to fall.
• C)A decrease in the money supply increases interest rates, causing investment to fall.
• D)An increase in taxes increases interest rates, causing investment to fall.

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Definitions:

Income Tax Schedule

A chart that delineates the tax rates applicable to different levels of income, used to calculate taxes owed.

Average Tax Rate

The fraction of total income that an individual or entity pays in taxes, calculated by dividing total taxes by the total taxable income.

Taxes

Compulsory financial charges or levies imposed by a government on its citizens to fund public expenditures.

Civilization

A complex human society characterized by the development of cities, social stratification, and a variety of cultural and technological advancements.