Given below are two statements: one is labelled as Assertion (A) and the other is labelled as Reason (R). Assertion (A): Deficit spending by the government leads to a crowding out effect on private investment. Reason (R): When the government finances its deficit by borrowing from the market, the bond prices go up and the rate of interest falls. In the light of the above statements, choose the most appropriate answer from the options given below:

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Economics · Macroeconomics - Crowding Out Effect

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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(A) is correct but (R) is not correct

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Answer 1

(A) is not correct but (R) is correct

Answer 2

(A) is correct but (R) is not correct

Answer 3

Both (A) and (R) are correct but (R) is not the correct explanation of (A)

Answer 4

Both (A) and (R) are correct and (R) is the correct explanation of (A)

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