The Crowding-Out Effect Implies That a

question 56

Multiple Choice

The crowding-out effect implies that a

• A) budget surplus will be highly effective against inflation.
• B) budget deficit is likely to stimulate aggregate demand and cause inflation.
• C) budget deficit will increase real interest rates and, thereby, retard private spending.
• D) budget surplus will retard aggregate demand and throw the economy into a downward spiral.