Crowding-out is the decrease in private consumption and investment that occurs when the government borrows more. This happens because government borrowing can raise interest rates, causing individuals and businesses to reduce their spending and investment due to higher borrowing costs.

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Crowding-Out Is

Question 193

Multiple Choice

Crowding-out is:

A) the first time a corporation sells stock to the public in order to raise capital.
B) a sophisticated IOU that documents who owes how much and when payment must be made.
C) something of value that by agreement becomes the property of the lender if the borrower defaults.
D) the decrease in private consumption and investment that occurs when government borrows more.

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