Economics Crowding Out Questions
Crowding out refers to the phenomenon where increased government borrowing leads to a decrease in the availability of credit for private borrowers, including large corporations. When the government borrows more, it increases the demand for loanable funds, which in turn drives up interest rates. As interest rates rise, it becomes more expensive for large corporations to borrow money, reducing their access to credit. This can limit their ability to invest, expand operations, or undertake new projects, ultimately impacting their growth and profitability.