Crowding out refers to a decline in ________ as a result of an increase in ________.
A)tax revenues; unemployment
B)government purchases; tax rates
C)government purchases; private expenditures
D)private expenditures; government purchases

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government spending leads to a reduction in private sector spending. This happens because government borrowing to finance its expenditures can lead to higher interest rates, which in turn discourages private investment.

Crowding Out Refers to a Decline in ________ as a Result