Economics Crowding Out Questions
The relationship between crowding out and consumer confidence is generally negative. Crowding out refers to the phenomenon where increased government borrowing leads to higher interest rates, which in turn reduces private sector investment and consumption. This can have a detrimental effect on consumer confidence as higher interest rates make it more expensive for individuals and businesses to borrow money, leading to reduced spending and investment. As a result, consumer confidence tends to decrease when crowding out occurs, as individuals become more cautious about their financial situation and future economic prospects.