The Crowding-Out Effect Suggests That

question 99

Multiple Choice

The crowding-out effect suggests that

• A) restrictive fiscal policy is an effective weapon against inflation.
• B) expansionary fiscal policy will be a highly effective weapon for fighting a recessionary downturn
• C) a budget surplus will cause the demand for loanable funds to decline, interest rates to rise, and aggregate demand to decrease.
• D) budget deficits that lead to higher interest rates reduce private investment spending.

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