The Crowding-Out Effect Suggests That

question 198

Multiple Choice

The crowding-out effect suggests that

• A) tax increases are paid primarily out of saving and therefore are not an effective fiscal device.
• B) government borrowing to finance the public debt increases the real interest rate and reduces private investment.
• C) it is very difficult to have excessive aggregate spending in a capitalist economy.
• D) consumer and investment spending always vary inversely.