The crowding out of private spending by government spending will be greater the

Question

Quizplus · Accepted Answer

If consumption, investment, and net exports are more sensitive to changes in interest rates, then an increase in government spending that leads to a rise in interest rates will have a greater impact on crowding out private spending. This is because higher interest rates will cause private spending to decrease more sharply, further reducing overall spending in the economy.

The Crowding Out of Private Spending by Government Spending Will