Crowding out is a decrease in private investment caused by:

Question

Quizplus · Accepted Answer

Crowding out occurs when the government increases its borrowing, leading to an increase in demand for loanable funds and a rise in interest rates. As a result, private investors may be discouraged from borrowing and investing as the cost of borrowing becomes more expensive. Increased taxation or consumer spending by households and increased exports do not directly cause crowding out.

Crowding Out Is a Decrease in Private Investment Caused By