CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

The crowding-out model implies that the budget deficit will ______
A. cause inflation.
B. increase the real interest rate.
C. reduce supply.
Explanation: The crowding-out effect refers to a reduction in private spending due to a higher real interest rate generated by government borrowing. The model does not imply anything about inflation, supply, or resource prices.

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User Comment
matzaala Increased Government borrowing increases the real interest rate for private borrowers.
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