In the long run,if government increases spending ________.
A)interest rates decrease
B)it crowds out private investment
C)saving increases
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

If the government increases spending, it will increase the demand for goods and services, which will lead to an increase in interest rates and a decrease in private investment. This is known as crowding out, as the government is crowding out private investment with its increased demand for goods and services. Saving may increase in the short run, but in the long run, it is likely to decrease due to the decrease in private investment. Therefore, option B is the best choice.

In the Long Run,if Government Increases Spending ________