The large budget deficits of 2003 and 2006 meant that the federal government was borrowing upwards of $1.7 trillion over this four-year period. If that borrowing limits the ability of the private sector to get financial capital for its purposes economists would call this

Question

Quizplus · Accepted Answer

Crowding out refers to a situation where government borrowing leads to higher interest rates, which crowds out private investment by reducing the amount of financial capital available to the private sector. This can limit private sector growth and investment in the economy. Therefore, option C is the correct answer.

The Large Budget Deficits of 2003 and 2006 Meant That