Economics · Fiscal Policy
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, bond supply increases, bond prices fall, and the rate of interest rises. In the light of the above statements, choose the correct answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(A) is false but (R) is true.
- 2(A) is true but (R) is false.
- 3Both (A) and (R) are true but (R) is NOT the correct explanation of (A).
- 4Both (A) and (R) are true and (R) is the correct explanation of (A).✓
Correct answer
Both (A) and (R) are true and (R) is the correct explanation of (A).
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