Rising interest rates can cause crowding out,but they are also the result of crowding out.

Question

Quizplus · Accepted Answer

Crowding out occurs when the government borrows money and increases the demand for loanable funds, which leads to higher interest rates. As a result, private investment decreases, and the economy may experience slower growth. Rising interest rates can also be a result of crowding out, as an increase in demand for loanable funds drives up interest rates. So, crowding out and rising interest rates can be mutually reinforcing factors.

Rising Interest Rates Can Cause Crowding Out,but They Are Also