When an increase in government spending leads to a decrease in private spending it is called:
A) crowding out.
B) a drop in the bucket.
C) bad timing.
D) the implementation lag.

Question

Quizplus · Accepted Answer

Crowding out occurs when increased government spending leads to higher interest rates, making it more expensive for businesses and individuals to borrow money. As a result, they reduce their spending, which can offset the effects of the government's spending.

When an Increase in Government Spending Leads to a Decrease