When crowding out occurs,
A)private spending replaces public spending
B)the dollar typically weakens in foreign exchange markets
C)public spending replaces private spending
D)it offsets any gains created from the lower interest rates
E)none of the above

Question

Quizplus · Accepted Answer

Crowding out occurs when increased public spending leads to a reduction in private sector spending, often due to higher interest rates resulting from government borrowing.

When Crowding Out Occurs