The crowding out effect refers to the ________ from ________ in the government's budget deficit.
A) decrease in investment; an increase
B) decrease in employment; an increase
C) decrease in consumption; an increase
D) increase in consumption; an increase
E) increase in investment; an increase

Question

Quizplus · Accepted Answer

The crowding out effect occurs when an increase in the government's budget deficit leads to an increase in interest rates, which then decreases investment by the private sector. This is because there is a limited amount of funds available for borrowing, and if the government is borrowing more, it leaves less available for private investment. Therefore, the crowding out effect refers to a decrease in investment, which is represented in choice A.

The Crowding Out Effect Refers to the ________ from ________

The Crowding Out Effect Refers to the from