Crowding out occurs when private individuals and firms increase investment and consumption at the same time that the government increases borrowing.

Name: Crowding out occurs when private individuals and firms increase investment and consumption at the same time that the government increases borrowing.
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Question

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Crowding out occurs when increased government borrowing leads to higher interest rates, which in turn reduces investment and consumption by private individuals and firms.

Crowding Out Occurs When Private Individuals and Firms Increase Investment