单选题 The crowding-out model suggests that persistent, large government budget deficits are most likely to be associated with a(n): A. increase in net exports. B. decrease in private spending. C. decrease in the real rate of interest.

【正确答案】 B

【答案解析】Crowding-out theory contends that when governments borrow to finance a deficit, they will create an increase in the demand for loanable funds. This will lead to higher real interest rates, which will reduce the profitability of certain investment projects and reduce demand for investment-based plant and equipment expenditures. Thus, the impact of the fiscal policy spending "crowds out" the demand for funds by private business.