Crowding out occurs when

a. the government budget is in surplus, so people have paid too much tax
b. households' budgets are in deficit and saving decreases
c. the government budget is in deficit but taxpayers are rational and the ricardo-barro effect operates
d. the government budget is in deficit and the real interest rate rises

D) the government budget is in deficit and the real interest rate rises

Explanation:

Crowding out refers to a situation where consumption and investment components of the GDP are negatively affected (reduced) by an increase in government spending which results in financial resources being excessively consumed by the government and increasing interest rates.

D, the government budget is in deficit and the real in terest rates rises

Explanation:

Crowding-out effect is a situation in which government spending increases and forces the spending of individuals or firms to reduce thereby increasing the rates of interest because the borrowed money by the governnment has to be paid back by every measn financially possible.

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