A decline in the investment share of GDP due to an increase in government purchases is known as
A)investment blackout.
B)disinvestment.
C)crowding out.
D)of these3.Determining the Equilibrium Interest RateCrowding OutBloom's: Knowledge

Question

Quizplus · Accepted Answer

A decline in the investment share of GDP due to an increase in government purchases is known as crowding out. This is because the increase in government purchases leads to an increase in interest rates, which reduces the amount of investment spending in the economy. This is due to the fact that higher interest rates increase the cost of borrowing, making it more expensive for business to finance investments. As a result, the government's increased spending crowds out private investment, leading to a decline in the investment share of GDP.

A Decline in the Investment Share of GDP Due to an Increase