Crowding out is a decrease in private investment caused by
A) increased taxation by the government.
B) increased borrowing by the government.
C) increased consumer spending by households.
D) increased exports to buyers in other nations.

Question

Quizplus · Accepted Answer

Crowding out is caused by increased borrowing by the government, which leads to higher interest rates and reduces private sector investment. Higher taxes by the government could also decrease private investment, but that is not the definition of crowding out. Increased consumer spending and exports do not necessarily have a direct impact on private investment.

Crowding Out Is a Decrease in Private Investment Caused by