The government implements a cash for clunkers program whereby anyone who owns a car that is at least six years old can trade it in on a new car and the government will pay for half of the cost of the new car.Suppose the majority of the people who take advantage of this program would have bought new cars anyway.This is an example of

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Crowding-out occurs when government spending displaces private spending or investment. In this scenario, if the majority of people taking advantage of the program would have bought new cars anyway, then the government's half-cost payment would be displacing their own private spending. Therefore, it is an example of crowding-out.

The Government Implements a Cash for Clunkers Program Whereby Anyone