Which of the following terms refers to the fall in investment due to government borrowing?
A)the Barro reduction
B)the Solow residual
C)the Ricardian principle
D)crowding out

Question

Quizplus · Accepted Answer

Crowding out refers to the phenomenon where increased government borrowing leads to a decrease in investment by the private sector, as the demand for funds increases and interest rates rise. This is because the government is competing with the private sector for funds, making it more expensive for businesses to borrow and invest.

Which of the Following Terms Refers to the Fall in Investment