One effect of the federal government's borrowing may be to drive private borrowers like businesses and households out of the market for loans. This is:

Question

Quizplus · Accepted Answer

When the federal government borrows, it increases demand for loanable funds, which can lead to higher interest rates. Higher interest rates make borrowing more expensive for private borrowers, potentially driving them out of the loan market. This is not referred to as Government Preemption, nor is it primarily because foreign lenders refuse loans to private borrowers once the government enters the market.

One Effect of the Federal Government's Borrowing May Be to Drive