Crowding Out Refers to the Situation in Which

question 16

Multiple Choice

Crowding out refers to the situation in which

• A) borrowing by the federal government raises interest rates and causes firms to invest less.
• B) foreigners sell their bonds and purchase U.S. goods and services.
• C) borrowing by the federal government causes state and local governments to lower their taxes.
• D) increased federal taxes to balance the budget causes interest rates to increase and consumer credit to decrease.

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