"Crowding out" is the theory that an increase in our federal government's budget deficit will likely:

Question

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Crowding out theory suggests that an increase in government spending will lead to higher interest rates, which will in turn decrease borrowing by households and businesses. This happens because the government's increased demand for funds will drive up interest rates, making it more expensive for others to borrow. As a result, private investment and consumption will decrease, "crowding out" the private sector.

"Crowding Out" Is the Theory That an Increase in Our