The crowding‑out effect describes a scenario in which federal deficit spending causes:

A. private spending to increase.
B. decreased interest rates, which reduces private spending.
C. increased interest rates, which reduces private spending.
D. wages to fall, crowding out workers in low‑paying jobs.

INCREASED INTEREST RATES WHICH REDUCES PRIVATE SPENDING.

Explanation:

Crowding out occurs when government increases its spending thus leading to a drop in private spending. It is a deliberate government policy to push out private spending so as to create more funds for loans. This then results in increased interest rates.

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