Which term refers to the fall in investment due to government borrowing?
A) the Barro reduction
B) the vicious circle
C) the Ricardian principle
D) crowding out

Question

Quizplus · Accepted Answer

The term that refers to the fall in investment due to government borrowing is crowding out. Crowding out occurs when the government borrows money to finance its spending, which increases demand for loanable funds and drives up interest rates. This decrease in the supply of loanable funds makes it more expensive for businesses to borrow, leading to a reduction in private investment.

Which Term Refers to the Fall in Investment Due to Government