The crowding-out effect of higher interest rates can be avoided by
A)expansionary monetary policy.
B)expansionary fiscal policy.
C)contractionary monetary policy.
D)decreasing taxes.

Question

Quizplus · Accepted Answer

Expansionary monetary policy, which often involves lowering interest rates or increasing the money supply, can counteract the crowding-out effect that occurs when higher interest rates reduce investment spending.

The Crowding-Out Effect of Higher Interest Rates Can Be Avoided