Complete crowding-out is when every dollar of
A) government spending crowds out one dollar of tax revenue.
B) government spending crowds out one dollar of private spending.
C) private spending crowds out one dollar of government spending.
D) private spending crowds out one dollar of tax revenue.
E) tax revenue crowds out one dollar of government spending.

Question

Quizplus · Accepted Answer

Crowding-out occurs when an increase in government spending leads to a decrease in private spending. This is because the increase in government spending results in higher interest rates, which in turn reduces private investment and consumption. Therefore, every dollar of government spending crowds out one dollar of private spending.

Complete Crowding-Out Is When Every Dollar of