Answer:
Hi, you haven't provided the options. Therefore, I'll just explain in my own words and you can check with the options.
The answer is increased interest rates reduces spending and borrowing by households and businesses.
Explanation:
Deficit means when government spending exceeds tax revenues.
Crowing out is when a government's deficit spending and borrowing to pay for that deficit spending. It leads to higher real interest rates and less investment spending.
When countries run budget deficits, they pay for them by borrowing money. And when governments borrow, they compete with everyone else in the economy who wants to borrow the limited savings available. As a result of this competition, the real interest rate increases and private investment decreases.
The answer to the question is, that:
INCREASED interest rates REDUCES spending and borrowing by households and businesses.
Answer:
The correct words for the blank spaces are: increasing; decrease.
Explanation:
Crowding Out Effect is an economic term that refers to government spending that pushes private sector spending down and can have more specific consequences. Crowding Out can refer to when government borrowing absorbs all of the economic lendings that are available. This causes increases in interest rates. As a result, private businesses and individuals consider that borrowing money is forbidden to finance growth and expansion, decreasing their expenses.
