The Crowding-Out Effect Refers to the Tendency of

question 42

Multiple Choice

The crowding-out effect refers to the tendency of

• A) the additional borrowing accompanying larger budget deficits to increase interest rates and reduce private spending.
• B) higher future taxes accompanying budget deficits to reduce private consumption.
• C) the inflation rate to rise when the unemployment rate is low.
• D) increases in private savings to reduce interest rates and, thereby, crowd-out government expenditures.

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