Which of the following is an example of crowding out?

Question

Quizplus · Accepted Answer

Crowding out occurs when government borrowing leads to an increase in interest rates, which in turn reduces private investment spending. In option B, the deficit created by government borrowing causes an increase in interest rates, which leads to a decrease in investment spending, exemplifying the concept of crowding out. The other options do not involve government borrowing or interest rates and are not examples of crowding out.

Which of the Following Is an Example of Crowding Out