Which of the following is not an example of crowding out?
A) Government purchases rise,the budget deficit rises,the federal government's demand for loanable funds rises,the interest rate rises,and investment falls.
B) Government spends more on X,prompting individuals to spend less on X.
C) Taxes decline,the budget deficit rises,the federal government's demand for loanable funds rises,the interest rate rises,the demand rises for U.S.dollars,the dollar appreciates,and net exports decline.
D) Business firms spend more on X,prompting households to spend less on Y.
E) none of the above

Question

Quizplus · Accepted Answer

This is not an example of crowding out because it does not involve government spending or borrowing. Crowding out occurs when the government's demand for loanable funds reduces the supply available for private investment, leading to higher interest rates and lower investment. Choices A, B, and C all involve government spending or taxation, which can lead to crowding out effects.

Which of the Following Is Not an Example of Crowding