The "Crowding-Out Effect" Suggests That

question 152

Multiple Choice

The "crowding-out effect" suggests that:

• A)the economy's productive capacity will reduce.
• B)imports are replacing domestic production.
• C)private investment is increasing at the expense of government spending.
• D)investment is increasing at the expense of consumption.

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Definitions:

Factor of Production

Resources used to create goods and services, typically classified into land, labor, capital, and entrepreneurship.

Currency Component

The part of the money supply consisting solely of currency in circulation - notes and coins.

Federal Reserve Notes

Paper currency issued by the Federal Reserve, the central bank of the United States, used as legal tender.

Checkable Deposits

Bank accounts that allow the owner to write checks to third parties. Checks can be used for payments while the account earns interest.