Even as the U.S. government ran large budget deficits in the early 2000s, the interest rate did not rise substantially. Which of the following is among the reasons that crowding out did not raise interest rates at that time?
A. The Federal Reserve decreased the money supply.
B. The government spent the borrowed money in such a way that productivity, and therefore the availability of savings, dramatically increased.
C. Americans increased their willingness to save at the same time that the budget deficits appeared.
D. Foreigners were willing to finance the U.S. deficit with their abundant supply of savings.
Answer: D
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