Question

a. what is crowding out?
a reduction in consumption and investment spending that results from increased international trade
a reduction in consumption, but not investment, that results from government borrowing
a reduction in investment, but not consumption, that results from government borrowing
a reduction in government borrowing resulting from increases in consumption and investment spending
a reduction in consumption and investment spending that results from government borrowing

Explanation:

Crowding - out occurs when government borrowing leads to higher interest rates. Higher interest rates make borrowing more expensive for consumers (reducing consumption) and for firms (reducing investment). It is not related to international trade (eliminating the first option). It affects both consumption and investment (eliminating options that say only one is affected). And it is government borrowing that causes the reduction in consumption and investment, not the other way around (eliminating the fourth option).

Answer:

a reduction in consumption and investment spending that results from government borrowing