Which of the Following Correctly Explains the Crowding-Out Effect

question 169

Multiple Choice

Which of the following correctly explains the crowding-out effect?

• A)An increase in government expenditures decreases the interest rate and so increases investment spending.
• B)An increase in government expenditures increases the interest rate and so reduces investment spending.
• C)A decrease in government expenditures increases the interest rate and so increases investment spending.
• D)A decrease in government expenditures decreases the interest rate and so reduces investment spending.

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Definitions:

Cost Overstate

The action of reporting or estimating a cost to be higher than it actually is.

Job Satisfaction

A measure of how content an individual is with their job; it can affect productivity, turnover, and overall workplace harmony.

Voice Mechanism

A method through which employees can express concerns, offer suggestions, or provide feedback within an organization to improve conditions or address issues.

Exit Mechanism

Strategies or processes that allow investors or business owners to withdraw from an investment or business operation, often seen in the context of startups or financial markets.