Crowding out results in a decrease in
A) transfer payments.
B) defense spending.
C) private spending.
D) government spending.

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government spending leads to a decrease in private spending. This usually happens because the government borrows money, which increases interest rates and makes it more expensive for individuals and businesses to borrow and spend. Transfer payments and defense spending are specific categories of government spending, so options A and B are not correct. Option D, government spending, is partially correct in that it is the type of spending that is crowding out private spending, but it is not the correct answer to the question as stated.

Crowding Out Results in a Decrease in