Figure 10-5
-Refer to Figure 10-5."Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above.

Question

Figure 10-5 
-Refer to Figure 10-5."Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above.

Quizplus · Accepted Answer

Crowding out occurs when increased government borrowing leads to higher interest rates, which in turn reduces private investment. This is typically illustrated by a movement from a lower interest rate to a higher one, such as from point A to point B.

Figure 10-5 -Refer to Figure 10-5."Crowding Out" of Firm Investment as a Investment