If Crowding Out Occurs in the Long Run and the Government

question 131

Multiple Choice

If crowding out occurs in the long run and the government increases spending for non- investment projects such as defense, then the additional government spending:

• A) replaces a larger amount of private investment.
• B) decreases total investment spending in the economy.
• C) replaces an equivalent amount of private non- investment.
• D) enhances private investment by the same amount.