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 government purchases of goods and services multiplier would predict because bondholders' saving declines
B) real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment declines
C) interest rates fall,reducing the burden of the debt
D) interest rates fall,bringing the current deficit back down
E) interest rates fall,so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit