Question 10 1 pts Which of the following best explains the crowding-out effect?

Question

Question 10 1 pts Which of the following best explains the crowding-out effect? the decrease in the supply of loanable funds that results from an increase in budget deficits an increase in consumption amongst households that crowds out savings O the decrease in investment opportunities for small businesses resulting from increased borrowing by larger corporations 0 the decrease in investment from higher interest rates that results from increased ng to finance larger budget deficits government borrowi

Explanation / Answer

Ans: the decrease in investment from higher interest rates that results from increased government borrowing to finance larger dudget deficits.

Explanation:

Crowding out effect refers to an increase in the government borrowing which will push interest rates upward, and it will lead to a reduction in private investment spending.

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