Crowding out is MOST likely when expansionary fiscal policy is accompanied by:
A) expansionary monetary policy.
B) open-market purchases.
C) slow growth of the money supply.
D) an investment tax credit.

Question

Quizplus · Accepted Answer

Crowding out is most likely when expansionary fiscal policy (such as increased government spending or tax cuts) is accompanied by a slow growth of the money supply. This is because the increased demand for funds can lead to higher interest rates, making borrowing more expensive for private investors and thus "crowding out" private investment.

Crowding Out Is MOST Likely When Expansionary Fiscal Policy Is