Question

Which of the following statements accurately describes

Q: Answer-Which of the following statements accurately describes the concept of 'crowding out' in the context...

Crowding out occurs when increased government spending leads to a reduction in private investment because government borrowing drives up interest rates.

the concept of "crowding out" in the context of fiscal policy?

A An increase in government spending leads to an increase in private investment.

B A decrease in government spending leads to an increase in private investment.

C An increase in government spending leads to a decline in private investment.

D A decrease in government spending leads to a decline in private investment.

E Government spending has no effect on private investment.

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Solution