If government and consumers are spending more and taxes are unchanged,there will be:
A) no crowding out,since there are no additional taxes.
B) crowding out,as people will buy more government bonds,but fewer private bonds.
C) crowding out,as people will buy more private bonds,but fewer government bonds.
D) crowding out,as businesses will produce more consumption goods,but less capital goods.

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government spending leads to higher demand for funds, raising interest rates and making it more expensive for the private sector to borrow. This can lead to reduced investment in private projects as funds are diverted to government bonds.

If Government and Consumers Are Spending More and Taxes Are