The crowding out effect refers to a decrease in

Question

Quizplus · Accepted Answer

The crowding out effect occurs when there is an increase in government borrowing to finance spending, which leads to a decrease in investment or consumption. This happens because the increase in government borrowing leads to an increase in interest rates, making it more expensive for private individuals and businesses to borrow money and therefore reducing their willingness or ability to invest or consume.

The Crowding Out Effect Refers to a Decrease in