Why does the crowding-out effect focus its attention on investment?
Multiple choice question.
Because investment does not affect GDP
Because investment is the most volatile component of GDP
Because investment is the most stable component of GDP
Because investment is the smallest component of GDP
1 answer
The correct answer is:
Because investment is the most volatile component of GDP.
The crowding-out effect often focuses on investment because changes in interest rates, often due to government spending, can significantly impact business investment decisions, which can vary widely in response to economic conditions.
