In the context of fiscal policy and its impact on national debt, which scenario best illustrates the
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Question:
In the context of fiscal policy and its impact on national debt, which scenario best illustrates the concept of "crowding out effect" due to government borrowing?
a A government significantly increases its spending funded by borrowing, leading to higher interest rates, which in turn reduces private investment in the economy.
b A central bank prints more money to finance government deficits, resulting in increased inflation.
c A government reduces its spending and increases taxes to balance the budget and reduce national debt.
d A nation experiences a trade surplus, leading to an appreciation of its currency and impacting its export competitiveness.
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