Which of the Following Sequences Best Represents the Crowding-Out Effect

question 26

Multiple Choice

Which of the following sequences best represents the crowding-out effect?

• A)government purchases ↑ ⇒ GDP ↑ ⇒ supply of money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
• B)government purchases ↓ ⇒ GDP ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↓
• C)government purchases ↑ ⇒ GDP ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
• D)taxes ↑ ⇒ GDP ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓

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Definitions:

Shareholders

Individuals or entities that own one or more shares of stock in a public or private corporation, giving them a right to a portion of the company's profits and assets.

Limited Liability

A legal structure that restricts the amount of money that owners or shareholders can lose in case the company fails, limiting their loss to the amount they have invested in the company.

Direct Management

The process of overseeing and directly controlling operations or tasks without intermediary levels of command.

Charter

A legal document that establishes a corporation or other organization, outlining its purpose, activities, and rights.