Crowding out occurs when borrowing by:
A) households reduces borrowing by businesses and government.
B) businesses reduces borrowing by households and government.
C) government reduces borrowing by households and businesses.
D) all of the above constitute crowding out.

Question

Quizplus · Accepted Answer

Crowding out occurs when government borrowing increases interest rates, which then reduces investment spending by businesses and borrowing by households due to the higher cost of borrowing.

Crowding Out Occurs When Borrowing By