This refers to an increase in government spending that produces a reduction in private spending

Question

Quizplus · Accepted Answer

Crowding out occurs when an increase in government spending leads to a decrease in private investment. This may happen because the increased government borrowing leads to higher interest rates, making it more expensive for private investors to borrow money. Therefore, they may reduce their investment, causing a reduction in private spending.

This Refers to an Increase in Government Spending That Produces