Which of the Following Correctly Explains the Crowding-Out Effect

question 169

Multiple Choice

Which of the following correctly explains the crowding-out effect?

• A)An increase in government expenditures decreases the interest rate and so increases investment spending.
• B)An increase in government expenditures increases the interest rate and so reduces investment spending.
• C)A decrease in government expenditures increases the interest rate and so increases investment spending.
• D)A decrease in government expenditures decreases the interest rate and so reduces investment spending.

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The quality or state of being significant, valued, or necessary in a particular context or to a particular matter.

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Special rights or advantages granted to individuals or groups based on status, position, or membership.

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The status of being a citizen, entailing certain rights, duties, and privileges in a particular nation or state.