The crowding-out effect of expansionary fiscal policy suggests that

A. government spending increases at the expense of private investment
B. imports replace domestic production private investment increases at the expense of government spending
C. saving increases at the expense of investment

A

Explanation:

There are policies that can be classified as contractionary and expansionary policies where contractionary is the policy which reduces the economic output and the expansionary is the policy which increases the economic output. The crowding-out effect is the effect that reduces private spending due to an increase in government spending. When there is increased government involvement in a sector of the market economy, this substantially affects the remainder of the market, either on the supply or demand side of the market.

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