The financing of a government deficit increases interest rates and, as a result, reduces investment spending.This statement describes
A)the supply-side effects of fiscal policy.
B)built-in stability.
C)the crowding-out effect.
D)the net export effect.

Question

Quizplus · Accepted Answer

The crowding-out effect refers to the situation where increased government borrowing leads to higher interest rates, which in turn reduces private investment spending.

The Financing of a Government Deficit Increases Interest Rates And