Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move?

Question

Quizplus · Accepted Answer

Crowding-out effect refers to the decrease in private investment due to increased government spending. This causes interest rates to rise and makes borrowing more expensive for businesses, which leads to a reduction in investment. As investment decreases, net exports also tend to decrease because businesses are less likely to produce goods and services for export. Therefore, both net exports and investment tend to move in the opposite direction from a change in government purchases. Choice C correctly reflects this relationship.

Due to Crowding-Out Effects,other Things Being Equal,in What Direction Will