'Crowding out' refers to the government's increased demand for credit,which:
A)displaces some private-sector consumption by decreasing the price level.
B)displaces some private-sector borrowing by decreasing the interest rate.
C)displaces some private-sector borrowing by increasing the interest rate.
D)hires labour away from the private sector.
E)means longer lines at government agencies.

Question

Quizplus · Accepted Answer

Crowding out occurs when the government increases demand for credit, typically through borrowing, which leads to an increase in interest rates. This increase in interest rates makes it more expensive for individuals and businesses to borrow money, which can lead to a decrease in private-sector borrowing. Therefore choice C is the best answer.

'Crowding Out' Refers to the Government's Increased Demand for Credit,which