When the economy is producing its potential output, an increase ...

[DyllonKazuo]

When the economy is producing its potential output, an increase in government spending must necessarily reduce some component of private spending. This phenomenon is called
 
  A) the multiplier effect. B) entitlement spending.
  C) fiscal policy. D) crowding out.

Question 2

In September 2008, the MONTHLY rate of inflation in Zimbabwe approached 489 BILLION percent. An inflation rate such as this would
 
  A) be too high to calculate using the CPI. B) decrease the natural rate of unemployment.
  C) seriously disrupt normal commerce. D) all of the above.

[vickyvicksss]

Answer to Question 1

D

Answer to Question 2

C