Crowding out will be less likely to occur if:
A)interest rates rise when the budget deficit increases.
B)interest rates fall when the budget deficit decreases.
C)business investment does not depend on interest rates.
D)business investment depends on interest rates.

Question

Quizplus · Accepted Answer

Crowding out is less likely to occur if business investment does not depend on interest rates because the primary mechanism through which crowding out happens is through increased interest rates reducing private investment. If business investment is insensitive to interest rates, then government borrowing and spending will not crowd out private investment.

Crowding Out Will Be Less Likely to Occur If