Which of the following statements about crowding out is false ?

Question

Quizplus · Accepted Answer

Crowding out affects both interest rates and economic growth. It occurs when increased government spending, financed by borrowing, leads to higher interest rates, thus reducing private investment and ultimately reducing economic growth. It is not directly caused by a budget surplus or deficit, but rather by the government's method of financing their spending. While it can offset some of the multiplier effect, it does not completely eliminate it.

Which of the Following Statements About Crowding Out Is False