Consider a closed-economy AD/AS macro model.A policy-induced increase in the government's budget deficit is most likely to crowd-out private investment if
A) interest rates decrease sharply as a result of the deficit.
B) interest rates rise sharply as a result of the deficit.
C) rising income increases the volume of saving and interest rates rise very little.
D) there is a very large output gap.
E) consumers reduce consumption as a result of the deficit.
Correct Answer:
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