answersLogoWhite

0

The crowding-out effect refers to a situation in which increased government spending leads to a reduction in private sector spending and investment. When the government borrows money to finance its expenditures, it can raise interest rates, making it more expensive for businesses and individuals to borrow. As a result, private investment may decline, offsetting the intended stimulative effects of government spending. This phenomenon highlights the complex interactions between public and private sectors in an economy.

User Avatar

AnswerBot

1mo ago

What else can I help you with?