Evidence of "crowding out" in the market for loanable funds at a rate of 8 percent could be:

Question

Quizplus · Accepted Answer

Crowding out occurs when the government borrows funds from the market for loanable funds, causing interest rates to increase and reducing the amount of funds available for private investment. If private investors are only willing to borrow at a rate lower than 8 percent, it suggests that the increased demand for loanable funds due to government borrowing has resulted in higher interest rates that are unattractive to private borrowers. This is evidence of crowding out. Choices B, C, and D do not necessarily indicate crowding out in the market for loanable funds.

Evidence of "Crowding Out" in the Market for Loanable Funds