The concept of 'Crowding Out' is more likely to occur when:
A. There is a liquidity trap
B. The economy is in a deep recession with excess capacity
C. Monetary policy is highly accommodative
D. The economy is near full employment and interest rates rise due to government borrowing
Answer: Option D
Solution (By JKSSB Mock Tests)
Crowding out is more pronounced when the economy is close to full employment, as higher government borrowing raises interest rates and reduces private investment.
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