If the RBA increases the money supply at the same time the government increases government spending, the severity of the crowding- out effect:
A) will be increased
B) could either increase or decrease depending on the sensitivity of planned investment to the interest rate
C) will be reduced
D) will not be affected

Question

Quizplus · Accepted Answer

Increasing the money supply can lower interest rates, which can offset the crowding-out effect caused by increased government spending.

If the RBA Increases the Money Supply at the Same