- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 3. Fiscal Policy
- Subject 4. Fiscal Policy Implementation
CFA Practice Question
Suppose that when government spending increases, firms decrease their levels of investment spending. This is an example of ______.
B. forcing out
C. jamming out
A. crowding out
B. forcing out
C. jamming out
Correct Answer: A
This is an example of crowding out, defined as a reduction in consumption, investment, or net exports due to an increase in government expenditures.
User Contributed Comments 5
| User | Comment |
|---|---|
| danlan | Know what's crowding out and crowding in. |
| moma20 | crowding out means decrease crowding in means increase |
| stevelaz | In out, in out, shake it all about, you do the okey cokey and .......... |
| DariSH | It's better to memorize it like this: Recall: I=PS+T-G; Then just think: when G is bigger than T, it decreases I by eating a part of PS. This is a crowding out effect. |
| chcarnes | Pretty sure it's jamming out |