Crowding out refers to the reduction of investment that can occur when government spending rises.

Question

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Crowding out occurs when government spending increases, leading to a decrease in investment by the private sector. This is because there is only a limited amount of funds available for investment, and when the government borrows more, it competes with private sector borrowers, driving up interest rates and making it more expensive for businesses to borrow money. As a result, businesses may cut back on investment, leading to a decrease in economic growth over time.

Crowding Out Refers to the Reduction of Investment That Can