'Crowding out' refers to a side-effect of fiscal rather than monetary policy because:
A) it is based on rising rather than falling interest rates.
B) it is based on falling rather than rising interest rates.
C) under monetary policy, private debt doesn't replace public debt.
D) under monetary policy, the dollar appreciates rather than depreciates.

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government spending leads to higher interest rates, which can reduce private investment. This is a side-effect of fiscal policy, not monetary policy, because it involves government spending and borrowing rather than central bank actions affecting money supply and interest rates.

'Crowding Out' Refers to a Side-Effect of Fiscal Rather Than