If fewer businesses offer new bonds to raise investment funds when government borrowing increases interest rates, this would be an example of:

Question

Quizplus · Accepted Answer

Crowding out occurs when government borrowing increases interest rates and reduces private investment. This can lead to fewer businesses offering new bonds to raise funds, as investors may prefer to invest in government securities due to the higher interest rates. Therefore, the decrease in private investment is an example of crowding out.

If Fewer Businesses Offer New Bonds to Raise Investment Funds