A practical implication of the crowding-out effect is that it:

Question

Quizplus · Accepted Answer

The crowding-out effect occurs when government spending increases lead to a decrease in private spending, as individuals and businesses may reduce their spending due to higher interest rates resulting from increased government borrowing. This reduction in private spending offsets some of the stimulus effect of the government spending, making expansionary fiscal policy less effective.

A Practical Implication of the Crowding-Out Effect Is That It