The Crowding-Out Effect Implies That

Multiple Choice

The crowding-out effect implies that:

A) ​increases in government purchases will lower interest rates and stimulate investment spending.
B) ​higher taxes reduce both consumption and saving.
C) ​fiscal policy effects on interest rates will be offset by monetary policy.
D) ​increases in government purchases increase income and the demand for loanable funds which will choke off some private spending.