Some economists argue that a rise in the interest rate,brought about by a rise in government borrowing in the loanable funds market to finance a budget deficit,brings in foreign funds in search of the higher interest rate return.This,in turn,dampens the rise in the interest rate.If this is true as far as it goes,there will be __________ crowding out than there would be if foreign funds did not flow into the country.
A) more
B) less
C) the same amount of
D) none of the above

Question

Quizplus · Accepted Answer

If foreign funds flow into the country to take advantage of the higher interest rates, they increase the supply of loanable funds. This increase in supply offsets the rise in interest rates, resulting in less crowding out of private investment than there would be without foreign funds. Therefore, the correct answer is B, less.

Some Economists Argue That a Rise in the Interest Rate,brought