Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes Consumption and investment to fall.
<h3>Option (D) is correct</h3>
<u>Explanation:</u>
When the government increases its spending this leads to an improve in the interest rates, Crowding out means when the improve in the rate of interest leads to lesser investment in an economy. The fall in investment immediately due to increase in rate of interest is called crowding out effect.
So crowding out will result in consumption and investment to fall. When interest rate increases the loans become more expensive. This leads to less borrowing in an economy that simultaneously causes investment to fall. People will have less money to invest.
The answer to this question is D
an important context clue in determining an appropriate definition for a particular word? is: a. the part of speech
The definition of a certain word would be different depending on where it located on the speech.
For example:
I saw him close the door. (1)
Timothy just close the deal. (2)
In sentence 1, the definition of the word 'close' refers to the act of shutting a barrier of entry. In sentence 2, the word refers to the act of finalizing a certain event or agreement.
