If budget deficits are financed by borrowing, the crowing-out effect can be offset by an increase in
government expenditure
savings
interest rates
exchange rates
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Option C Interest rates
This can offset the crowding out effect because higher interest rates reduce the demand for borrowing and investment, which can mitigate the impact of increased government borrowing on private investment. However, higher interest rates also make borrowing more expensive for businesses and individuals, which can negatively impact economic growth.
The crowding-out effect causes increase in interest rate so, how will higher interest rate still offset the crowding-out effect. This question is not clear, there is something wrong
When the economy is operating near capacity, government borrowing to finance an increase in the deficit causes interest rates to rise. Higher interest rates reduce or “crowd out” private investment, and this reduces growth
I think the answer should be interest rate
