The Crowding-Out Effect Implies That an Increase in Government Borrowing

Multiple Choice

The crowding-out effect implies that an increase in government borrowing to finance deficit financing results in _____.

A) an increase in the demand for money that causes interest rate to rise
B) a decrease in the demand for money that causes interest rate to rise
C) an increase in private investments by businesses
D) an increase in the demand for money that causes interest rate to fall
E) an increase in consumption spending by households.