The Crowding-Out Effect Arises When

Multiple Choice

The crowding-out effect arises when:

A) government borrows in the money market, thus increasing interest rates and net investment spending in the economy.
B) government borrows in the money market, thus increasing interest rates and decreasing net investment spending.
C) the progressivity of the tax system increases, thus decreasing interest rates and increasing net investment spending.
D) the progressivity of the tax system decreases, thus decreasing interest rates and net investment spending.