According to the Crowding-Out Effect, How Does a Decrease in Government

question 109

Multiple Choice

According to the crowding-out effect, how does a decrease in government spending affect the interest rate and investment spending?

• A) It increases the interest rate and so increases investment spending.
• B) It increases the interest rate and so decreases investment spending.
• C) It decreases the interest rate and so increases investment spending.
• D) It decreases the interest rate and so decreases investment spending.

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