The decrease in private spending that occurs when the government increases spending is called:
A) crowding out.
B) a drop in the bucket.
C) a matter of timing.
D) a real shock.

Question

Quizplus · Accepted Answer

Crowding out occurs when the government borrows money to increase spending, which can lead to increased interest rates and a decrease in private investment and spending. This decrease in private spending is known as crowding out. The other choices do not accurately describe this phenomenon.

The Decrease in Private Spending That Occurs When the Government