Crowding out refers to the government's increased demand for credit, which: a. hires labor away from...
Crowding out refers to the government's increased demand for credit, which:
a. hires labor away from the private-sector.
b. displaces some private-sector borrowing by decreasing the interest rate.
c. displaces some private-sector borrowing by increasing the interest rate.
d. displaces some private-sector consumption by decreasing the price level.
e. displaces some import purchases by the private-sector.
Homework Answers
Solution:
The solution for this question is option C. it displaces some private sector borrowing by increasing the interest rate. because the crowding out effect from the name it self it explains that it is the phenomenon in which there is rise in public sector spending drives and downfall in private sector spending which means the government is itself lending more money in place of private sectors . Hence the rest options are not applicable for the question .
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