Crowding out is associated with:
A)a reduction in business investment resulting from an increase in government borrowing and higher interest rates.
B)an increase in business investment resulting from an increase in government borrowing and higher interest rates.
C)an increase in private savings caused by higher future tax liabilities when government increases borrowing.
D)a decrease in government spending caused by a shortage of available credit.

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government borrowing leads to higher interest rates, which in turn reduces business investment because borrowing costs become more expensive.

Crowding Out Is Associated With