Economics · Fiscal Policy
In macroeconomic theory and fiscal policy, what does the term 'crowding out' mean?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Reduction in private investment due to an increase in government borrowing and spending✓
- 2Reduction in consumer spending due to a hike in direct tax rates
- 3Reduction in foreign direct investment due to a rise in total sovereign debt
- 4Increase in the structural inflation rate due to high government budget deficits
Correct answer
Reduction in private investment due to an increase in government borrowing and spending
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