The Crowding-Out Effect Indicates That Budget Deficits

Multiple Choice

The crowding-out effect indicates that budget deficits

A) will stimulate aggregate demand and, therefore, exert a strong impact on output and employment.
B) will lead to additional borrowing and higher interest rates that will reduce the level of private spending.
C) are highly appropriate when the threat of inflation is present.
D) are highly appropriate when the threat of recession is present.