The costs of "crowding-out" are most obvious when the economy is

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When the economy is at full employment, any increase in government spending or borrowing can result in higher interest rates, which in turn can discourage private investment and reduce consumption. This is known as crowding-out, where government borrowing "crowds out" private investment. At full employment, there is little excess capacity in the economy to fill the gap left by the reduction in private investment, leading to reduced economic output and growth.

The Costs of "Crowding-Out" Are Most Obvious When the Economy