Rising Interest Rates Can Cause Crowding Out,but They Are Also

question 141

True/False

Rising interest rates can cause crowding out,but they are also the result of crowding out.
When the government borrows more funds to finance larger deficits,it puts pressure on financial markets.That added pressure may cause interest rates to rise.If they do,households will be less eager to borrow money to buy cars,houses,and other debt-financed products.Businesses,too,will be more hesitant to borrow and invest.Hence rising interest rates are both a symptom and a cause of crowding out.

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Definitions:

Hypergeometric Formula

A statistical formula used to calculate probabilities without replacement for finite populations.

Without Replacement

A sampling method where each selected unit is not returned to the population before the next draw.

Characteristic

A trait or feature that defines or distinguishes a person, object, or phenomenon from others.

Probability

A measure of the likelihood that a particular event will occur, expressed as a number between 0 and 1.