The Crowding-Out Effect Implies That an Increase in Government Borrowing

question 69

Multiple Choice

The crowding-out effect implies that an increase in government borrowing to finance deficit financing results in _____.

• A)an increase in the demand for money that causes interest rate to rise
• B)a decrease in the demand for money that causes interest rate to rise
• C)an increase in private investments by businesses
• D)an increase in the demand for money that causes interest rate to fall
• E)an increase in consumption spending by households.

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