Crowding in occurs when government spending, by raising Real GDP, induces increases in private investment spending.

Question

Quizplus · Accepted Answer

Crowding in is a concept in which government spending can stimulate private investment. This occurs when the increase in government spending leads to an increase in the overall demand for goods and services, thereby raising the expected return on private investment projects. Private investors feel encouraged to increase their investments, leading to an increase in overall investment spending.

Crowding in Occurs When Government Spending, by Raising Real GDP