Crowding out is the idea that an increase in government spending may cause a reduction in private sector spending.
Crowding out occurs when a reduction in private sector borrowing (and spending)is caused by increased government borrowing.

Question

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When the government borrows more to fund its spending, it competes with the private sector for available funds in the credit market. This competition raises interest rates, making borrowing more expensive for individuals and businesses, which can lead to a reduction in private sector spending. This phenomenon is known as crowding out.

Crowding Out Is the Idea That an Increase in Government