Economics · Fiscal Policy
The 'crowding-in effect' refers to the situation where:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Open market sales reduce private sector liquidity
- 2Higher taxes crowd out private consumption
- 3Government deficit spending during recession raises private investment and economic activity✓
- 4Government borrowing raises interest rates and reduces private investment
Correct answer
Government deficit spending during recession raises private investment and economic activity
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