What do economists use the term "crowding out" to describe?
A)the decrease in per capita real GDP from a growing population
B)the law of diminishing returns
C)the effect of a government budget deficit on investment spending
D)decreasing returns to scale

Question

Quizplus · Accepted Answer

Economists use the term "crowding out" to describe the effect of a government budget deficit on investment spending. When the government borrows money to finance a deficit, it increases the demand for loanable funds, which in turn increases interest rates. This makes it more expensive for firms and individuals to borrow money for investment, decreasing investment spending and potentially slowing economic growth.

What Do Economists Use the Term "Crowding Out" to Describe