Economists who argue in favor of rapid deficit reduction claim that deficit reduction will
A)reduce crowding in, reduce interest rates, and increase AS.
B)stimulate AD and productivity.
C)trigger crowding in, increase investment, and increase AS.
D)reduce crowding out, increase investment, and increase AS.

Question

Quizplus · Accepted Answer

Economists who support rapid deficit reduction argue that it will reduce crowding out, which occurs when government borrowing drives up interest rates and makes it more expensive for the private sector to borrow and invest. Lower interest rates can lead to increased investment and, consequently, an increase in aggregate supply (AS).

Economists Who Argue in Favor of Rapid Deficit Reduction Claim