A larger crowding-out effect:
A)increases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effects on investment.
B)increases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effects on investment.
C)decreases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effects on investment.
D)decreases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effects on investment.

Question

A larger crowding-out effect:
A)​increases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effects on investment.
B)​increases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effects on investment.
C)​decreases the magnitude of a given fiscal policy's effect on interest rates and increases the magnitude of its effects on investment.
D)​decreases the magnitude of a given fiscal policy's effect on interest rates and decreases the magnitude of its effects on investment.

Quizplus · Accepted Answer

A larger crowding-out effect means that a given fiscal policy will have a larger effect on interest rates, which will in turn have a larger effect on investment.

A Larger Crowding-Out Effect