APFIVE Crowding Out With Inelastic Supply
In the loanable funds market, if the supply of loanable funds is highly inelastic and government borrowing increases substantially, what would be the primary consequence?
A
Minimal crowding out with small interest rate changes
B
Severe crowding out with large interest rate increases
C
Lower interest rates with expanded total investment
D
Increased private investment despite higher interest rates
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