Private investment will be most likely to be increased as a result of a rise in

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UPSSSC PET 24 Aug 2021 Shift 2 (Series A) (Official Paper)
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  1. The rate of interest
  2. The price of shares
  3. Expected yield on new capital
  4. Personal taxation

Answer (Detailed Solution Below)

Option 3 : Expected yield on new capital
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The correct answer is the Expected yield on new capital.

Key Points

  • A larger budget deficit will increase the demand for financial capital.
    • If private savings and the trade balance remain the same, then less financial capital will be available for private investment in physical capital.
    • Private investment will be most likely to be increased as a result of a rise in the expected yield on new capital.
  • When government borrowing soaks up available financial capital and leaves less for private investment in physical capital, the result is known as crowding out.
    • A situation when increased interest rates lead to a reduction in private investment spending such that it dampens the initial increase of total investment spending is called the crowding-out effect.
Latest UPSSSC PET Updates

Last updated on Jul 15, 2025

-> The UPSSSC PET Exam Date 2025 has been released which will be conducted on September 6, 2025 and September 7, 2025 in 2 shifts.

-> The PET Eligibility is 10th Pass. Candidates who are 10th passed from a recognized board can apply for the vacancy.

->Candidates can refer UPSSSC PET Syllabus 2025 here to prepare thoroughly for the examination.

->Candidates who want to prepare well for the examination can solve PET Previous Year Paper.

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