Which component of aggregate expenditure is most subject to crowding out?
A)consumption expenditures
B)investment spending
C)U.S.imports
D)government purchases of goods and services
E)saving

Question

Quizplus · Accepted Answer

Investment spending is most subject to crowding out because when the government increases its own borrowing and thus interest rates, it becomes more expensive for businesses to borrow money for investment purposes. This may lead to a decrease in investment spending, which is a component of aggregate expenditure.

Which Component of Aggregate Expenditure Is Most Subject to Crowding