单选题 The crowding-out effect suggests that: A. expansionary fiscal policy leads to inflation. B. restrictive fiscal policy is an effective weapon against inflation. C. greater government deficits will drive up interest rates, thereby reducing private investment.

【正确答案】 C

【答案解析】The crowding out effect refers to a reduction in private borrowing and spending as a result of higher interest rates generated by budget deficits that are financed by borrowing in the private loanable funds market.