The primary concern of economists worried about the crowding out effect is the:
A) growing size of the national debt.
B) size of the interest payments on the national debt as compared with GDP.
C) debate over future generations.
D) upward pressure that increased borrowing places on interest rates.

Question

Quizplus · Accepted Answer

The crowding out effect refers to the upward pressure on interest rates that occurs when the government increases borrowing to finance its budget deficit. This can increase the cost of borrowing for private individuals and firms, reducing their willingness to borrow, invest and spend, and can slow down economic growth. As such, economists who are concerned about the crowding out effect are primarily worried about the impact of government borrowing on interest rates, not necessarily the size of the national debt or other long-term concerns.

The Primary Concern of Economists Worried About the Crowding Out