Which of the following components of aggregate expenditure is most subject to crowding out?
A) consumption expenditures
B) investment spending
C) imports
D) government purchases of goods and services
E) national saving

Question

Quizplus · Accepted Answer

Investment spending is the most subject to crowding out because it involves borrowing money for long-term projects that rely on interest rates. If the government increases its own borrowing, it drives up interest rates, which increases the cost of borrowing for businesses, leading to a decrease in investment spending. The other components of aggregate expenditure (consumption, imports, government purchases, and national saving) are less influenced by interest rates and government borrowing.

Which of the Following Components of Aggregate Expenditure Is Most