The crowding out effect explains how an increase in consumption expenditures can decrease government expenditure.

Name: The crowding out effect explains how an increase in consumption expenditures can decrease government expenditure.
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The crowding out effect actually explains how an increase in government expenditure can decrease private investment. It occurs when increased government demand for loanable funds leads to higher interest rates, which in turn discourage private investment.

The Crowding Out Effect Explains How an Increase in Consumption