Which of the following statements is true regarding crowding out?

Question

Quizplus · Accepted Answer

Crowding out refers to the government borrowing funds from the private sector, which leads to increased interest rates and in turn, reduces private investment. As a result, savings that would have been used for business investment are diverted to government spending. Option B is incorrect because minimum wage does not directly relate to crowding out. Option C is incorrect because property rights protection does not necessarily lead to increased consumption. Option D is incorrect because the displacement of workers without the required skills is not necessarily related to crowding out.

Which of the Following Statements Is True Regarding Crowding Out