Which piece of evidence is consistent with zero crowding out?
A) Government purchases rise and Real GDP does not change.
B) Government purchases rise and investment spending declines.
C) Government purchases rise and net exports decline.
D) Government purchases rise and consumption declines.
E) none of the above

Question

Quizplus · Accepted Answer

Zero crowding out implies that an increase in government spending does not lead to a decrease in private sector spending (such as investment, consumption, or net exports). None of the options provided are consistent with zero crowding out, as they all suggest a reduction in some form of private spending or no change in Real GDP in response to increased government purchases.

Which Piece of Evidence Is Consistent with Zero Crowding Out