The reduction in consumption, investment or net exports that occurs when government spending increases is known as:

Question

Quizplus · Accepted Answer

The term "crowding out" refers to the reduction in private sector spending that occurs as a result of increased government spending. This happens because the government's increased demand for goods and services leads to higher prices and interest rates, which in turn discourage private consumption, investment, and net exports.

The Reduction in Consumption, Investment or Net Exports That Occurs