-If the original condition in the market for loans were shown by demand and supply curves D and S, crowding out would be illustrated by a:
A) shift of the supply curve from S to S'.
B) shift of the supply curve from S' to S.
C) shift of the demand curve from D to D'.
D) movement along the demand curve from point a to point d.

Question

-If the original condition in the market for loans were shown by demand and supply curves D and S, crowding out would be illustrated by a:
A) shift of the supply curve from S to S'. 
B) shift of the supply curve from S' to S. 
C) shift of the demand curve from D to D'. 
D) movement along the demand curve from point a to point d.

Quizplus · Accepted Answer

Crowding out occurs when increased government borrowing leads to higher interest rates, which reduces investment spending by the private sector. This is illustrated by a shift of the demand curve for loans from D to D', indicating an increase in the demand for loans.

-If the Original Condition in the Market for Loans Were