Correct Answer: A decrease in private investment due to increased government expenditure

Solution : The correct answer is (a) A decrease in private investment due to increased government expenditure.

The concept of the "crowding-out effect" in the government budget refers to a situation where increased government expenditure reduces or "crowds out" private investment in the economy. This effect occurs when the government borrows funds from the financial market to finance its spending, leading to higher interest rates and increased competition for available funds.

When the government increases its expenditure and borrows from the market, it raises the demand for loanable funds. As a result, interest rates tend to rise because there is a limited supply of funds available. Higher interest rates can discourage private businesses and individuals from borrowing and investing, as the cost of borrowing becomes more expensive.

The crowding-out effect suggests that increased government spending can lead to a decrease in private investment, as businesses and individuals find it more challenging or costly to secure the necessary funds for their own investment activities.