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Business, 24.12.2019 04:31 gonzalesalexiaouv1bg

In january, the interest rate is 5 percent and firms borrow $50 billion per month for investment projects. in february, the federal government doubles its monthly borrowing from $25 billion to $50 billion. that drives the interest rate up to 7 percent. as a result, firms cut back their borrowing to only $30 billion per month.
which of the following is true?

a. there is no crowding-out effect because the government's increase in borrowing exceeds rm's decrease in borrowing.
b. there is a crowding-out effect of $20 billion.
c. there is no crowding-out effect because both: government and firms are still borrowing a lot.
d. there is a crowding-out effect of $25 billion.

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