When does the economic phenomenon of 'crowding out' occur?

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Economics · Fiscal Policy

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Government borrowing raises interest rates and reduces private investment.

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Answer 1

Government spending reduces private consumption directly.

Answer 2

Tax cuts decrease public spending.

Answer 3

Government borrowing raises interest rates and reduces private investment.

Answer 4

Fiscal expansion lowers interest rates.

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