The tendency for a government budget deficit to decrease investment is called the

Question

Quizplus · Accepted Answer

The tendency for a government budget deficit to decrease investment is called the crowding-out effect. This occurs when the government borrows funds to finance the deficit, which increases demand for credit and raises interest rates. As a result, some private sector investment is crowded-out, as it becomes more costly to borrow money for investment purposes.

The Tendency for a Government Budget Deficit to Decrease Investment