If a Federal Budget Deficit Causes Crowding Out, _____

Multiple Choice

If a federal budget deficit causes crowding out, _____

A) real GDP does not increase by as much as the spending multiplier would predict, because the marginal propensity to consume decreases.
B) real GDP does not increase by as much as the spending multiplier would predict, because investment decreases.
C) interest rates fall, reducing the burden of the national debt.
D) firms become more willing to invest.
E) interest rates fall, so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit.