When government borrowing reduces the amount of funds available for lending to businesses,this is called:

Question

Quizplus · Accepted Answer

Crowding out occurs when the government borrows money, which reduces the amount of funds available for lending to businesses. This results in an increase in interest rates, making it more difficult and expensive for businesses to borrow money for investments and expansion. Therefore, option B) is the correct answer. Credit rationing is when lenders limit the amount of credit available to borrowers, capital rationing is a financial constraint on businesses that restricts their ability to invest in high-return projects, and government quotas are limits on the quantity of goods or services that can be produced or imported/exported. None of these options accurately describe the scenario of reduced funds available for lending to businesses due to government borrowing.

When Government Borrowing Reduces the Amount of Funds Available for Lending