The "Crowding Out" Effect Refers to The

question 28

Multiple Choice

The "crowding out" effect refers to the:

• A) increase in domestic investment by foreigners, leaving little investment choice for domestic investors.
• B) reduction in the interest rate caused by governments running a deficit.
• C) reduction in domestic investment caused by governments running a deficit.
• D) irrational exuberance of the market reducing the number of rational investments available.

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Definitions:

Commercial Substance

A concept in accounting indicating that a transaction significantly affects the economic situation of the involved parties through a change in cash flows or the value of assets and liabilities.

Trade-In Allowance

The credit a buyer receives for a previous item towards the purchase of a new item.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life.

Commercial Substance

A concept in accounting that indicates a transaction has significantly changed the economic conditions or the cash flows of an entity.