Rising Interest Rates Can Cause Crowding Out,but They Are Also

Rising interest rates can cause crowding out,but they are also the result of crowding out.
When the government borrows more funds to finance larger deficits,it puts pressure on financial markets.That added pressure may cause interest rates to rise.If they do,households will be less eager to borrow money to buy cars,houses,and other debt-financed products.Businesses,too,will be more hesitant to borrow and invest.Hence rising interest rates are both a symptom and a cause of crowding out.