The crowding- in effect implies that a decrease in government purchases causes:
A) interest rates to rise, which increases investment.
B) interest rates to fall, which increases investment.
C) interest rates to fall, which decreases investment.
D) interest rates to rise, which decreases investment.

Question

Quizplus · Accepted Answer

The crowding-in effect suggests that when government purchases decrease, it can lead to lower interest rates, which in turn encourages more private investment.

The Crowding- in Effect Implies That a Decrease in Government