An increase in private sector borrowing (and spending)caused by decreased government borrowing is called a crowding-in effect.
When the deficit shrinks,interest rates will fall,leading the private sector to borrow and invest more.

Question

Quizplus · Accepted Answer

This statement accurately describes the crowding-in effect. When the government borrows less, there is less competition for available funds in financial markets. This leads to a decrease in interest rates and makes it more attractive for the private sector to borrow and invest.

An Increase in Private Sector Borrowing (And Spending)caused by Decreased