Crowding out is the offsetting effect on private expenditures caused by the government's sale of bonds to finance expansionary fiscal policy.

Question

Quizplus · Accepted Answer

Crowding out occurs when government spending increases, leading to higher demand for borrowing. This increase in borrowing can raise interest rates, making it more expensive for the private sector to borrow and invest, thus potentially reducing private expenditure in the economy.

Crowding Out Is the Offsetting Effect on Private Expenditures Caused