An Increase in Government Spending Can Result in Crowding-Out

Multiple Choice

An increase in government spending can result in crowding-out.Which of the following is a correct statement of the process?

A) It leads to a decrease in savings,which leads to a decrease in investment spending.
B) It leads to an increase in money supply,which pushes interest rates up and causes a decrease in investment spending.
C) It causes bond prices to increase,which pushes interest rates up and leads to a decrease in investment spending.
D) It increases the price level and the demand for money,which causes interest rates to increase and investment spending to decrease.
E) It leads to an increase in GDP and in savings,which increases investment spending