Multiple Choice
Which of the following correctly explains the crowding-out effect?
A) An increase in government expenditures decreases the interest rate and so increases investment spending.
B) An increase in government expenditures increases the interest rate and so reduces investment spending.
C) A decrease in government expenditures increases the interest rate and so increases investment spending.
D) A decrease in government expenditures decreases the interest rate and so reduces investment spending.
Correct Answer:
Verified
Correct Answer:
Verified
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