When the government sells bonds,some of the funds that would have gone to private investments go to the government.This situation is called:

Question

Quizplus · Accepted Answer

Crowding out refers to the situation where government borrowing reduces the amount of funds available for private investments. This is because when the government sells bonds to investors, they compete with other borrowers such as businesses, which can lead to a rise in interest rates. As a result, businesses may find it more expensive to borrow money, which can limit their ability to invest in new projects and hire workers. Thus, crowding out can have a negative impact on economic growth in the long term.

When the Government Sells Bonds,some of the Funds That Would