The Idea That a Decrease in the Price Level Raises

question 198

Multiple Choice

The idea that a decrease in the price level raises the real value of households' money holdings,which increases consumer spending and the quantity of goods and services demanded is known as

• A)the interest-rate effect.
• B)the exchange-rate effect.
• C)the theory of liquidity preference.
• D)the wealth effect.

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Definitions:

Crowding-out

A situation where increased public sector spending reduces the amount of available funds for private sector investments.

National Debt

The total amount of money that a country's government has borrowed, typically as a result of deficit spending, and yet to repay.

Social Security Tax Surplus

The excess of revenues collected for Social Security over the expenditures on the program.

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector investment, due to the government borrowing absorbing a larger share of available financial resources.