Refer to the above graph.If interest rates increased by 2 percentage points, what event would most likely counteract the crowding-out effect?
A)a shift from curve B to curve A
B)a shift from curve A to curve B
C)a movement from point 5 to point 2
D)a movement from point 3 to point 1

Question

Refer to the above graph.If interest rates increased by 2 percentage points, what event would most likely counteract the crowding-out effect?
A)a shift from curve B to curve A 
B)a shift from curve A to curve B 
C)a movement from point 5 to point 2 
D)a movement from point 3 to point 1

Quizplus · Accepted Answer

A shift from curve A to curve B would indicate an increase in investment demand, which would counteract the crowding-out effect caused by higher interest rates.

Refer to the Above Graph