Crowding out occurs when investment declines because a budget
A)deficit makes interest rates rise.
B)deficit makes interest rates fall.
C)surplus makes interest rates rise.
D)surplus makes interest rates fall.

Question

Quizplus · Accepted Answer

Crowding out occurs when a government budget deficit drives up interest rates, which in turn leads to reduced investment spending by the private sector.

Crowding Out Occurs When Investment Declines Because a Budget