The crowding-in effect results from
A)a low MPS.
B)induced investment.
C)induced consumption.
D)rising interest rates.

Question

Quizplus · Accepted Answer

The crowding-in effect results from induced investment, which is an increase in private sector investment caused by an increase in government spending or a decrease in taxes. This is due to the increased demand for goods and services resulting from the government stimulus, leading to increased profits and incentives for businesses to invest in expanding their production capacity. It is called "crowding-in" because government spending crowds in private investment, resulting in further economic growth.

The Crowding-In Effect Results from