Crowding out would most likely occur when: (A) workers lose jobs as a result of anti-inflationary fiscal policies. (B) the federal government engages in bond sales to finance its budget deficit. (C) Congress enacts budget cuts to balance the budget. (D) tax receipts rise more slowly than anticipated, resulting in the need to cut government spending.

Question

Ginny

Social Studies

3 April, 17:41

Crowding out would most likely occur when: (A) workers lose jobs as a result of anti-inflationary fiscal policies. (B) the federal government engages in bond sales to finance its budget deficit. (C) Congress enacts budget cuts to balance the budget. (D) tax receipts rise more slowly than anticipated, resulting in the need to cut government spending.

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Answers (1)

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Layla Massey · Answer 1

Answer: the correct answer is (B) the federal government engages in bond sales to finance its budget deficit

Explanation:

The government spending is "crowding out" investment because it is demanding more loanable funds and thus causing increased interest rates and therefore reducing investment spending.