A decrease in private sector borrowing and spending caused by increased government borrowing is
A)Crowding in.
B)Crowding out.
C)Fiscal stimulus.
D)The GDP gap.

Question

Quizplus · Accepted Answer

When the government increases borrowing, it competes with the private sector for available funds. This drives up interest rates, making it more expensive for businesses and individuals to borrow money. As a result, private sector borrowing and spending decreases, and this phenomenon is called crowding out. Therefore, Option B is the correct answer.

A Decrease in Private Sector Borrowing and Spending Caused by Increased